Gold rose on Wednesday morning in Asia, with the dollar falling, offsetting a rise in US bond yields. There is also concern that the rate hike could come sooner than expected.
Gold futures were up 0.22% to $1774.35 by 12:56 AM ET (4:56 AM GMT).
The yellow metal rallied as much as 1.2% on Tuesday before a rally in US Treasury yields forced it to give up most of those gains. The yield on the 10-year Treasury note hit its highest level since May 20, 2021, on Wednesday.
Compensating for these higher yields, however, is the weakening Dollar, which inched lower on Wednesday.
“Gold stays there, but I think as soon as the US Federal Reserve changes its stance more closely, gold could ignore rising inflation and trend lower,” said SPI deputy general manager. Asset Management, Stephen Innes told Reuters.
Meanwhile, if inflation continues to rise at its current rate over the next few months instead of falling as expected, Fed policymakers may need to adopt a "more aggressive policy response." in 2022, according to Fed Governor Christopher Waller.
While persistent inflation is likely to be the biggest risk to the U.S. economy next year, the Federal Reserve is expected to wait until 2023 before raising interest rates, according to a U.S. poll. Reuters.
Innes said higher yields and a rising equity market suggest the market remains upbeat about the health of the economy, posing another challenge for the safe-haven precious metal.
In China, the benchmark lending rate released earlier in the day was unchanged at 3.85%. In other precious metals, silver rose 0.4%, while platinum fell 0.4% and palladium fell 0.4% to $2,089.68.
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