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Gold held an advance as investors weighed comments by Federal Reserve Chair Jerome Powell, who reiterated that higher inflation will likely be transitory.
Inflation had picked up but should move back toward the Fed’s 2% target once supply imbalances resolve, Powell said in written remarks prepared for his Tuesday testimony before the House Select Subcommittee on the Coronavirus Crisis. Investors will tune in to the hearing for potential questions that shed more light on his view on the pace of the economic rebound and the outlook for monetary policy.
Read more: Powell Renews Forecast for Inflation Subsiding Toward Fed’s Goal
Bullion climbed Monday after its biggest weekly decline in 15 months, helped by a drop in the dollar and robust inflows into gold-backed exchange-traded funds late last week. While gold took a hit after the Fed’s hawkish tilt at its most recent policy meeting, it’s recovering a little as investors weigh the prospects of very gradual tightening.
Spot gold was little changed at $1,784.14 an ounce at 9:14 a.m. in Singapore, after climbing 1.1% on Monday. Prices fell 6% last week, the most since March 2020. Silver retreated, while platinum and palladium steadied. The Bloomberg Dollar Spot Index edged up after dropping 0.4% on Monday.
Oil was up Tuesday morning in Asia, with signs emerging of a rapidly tightening market.
Brent oil futures were up 0.32% to $75.14 by 4:41 PM ET (4:41 AM GMT), after hitting the $75 mark for the first time in more than two years. WTI futures inched up 0.10% to $73.19.
Brent futures have rallied more than 40% this year as countries such as the U.S., China and Europe continue their economic recoveries from COVID-19, thus improving the fuel demand outlook.
Bank of America Corp. (NYSE: BAC) even forecast that the global crude benchmark could hit the $100 a barrel in 2022 thanks to a rebound in travel.
“Demand optimism is now well established, and a tightening of the market is very much in the spotlight… if there is a pause in this rally, it will likely come from the supply side,” Vanda (NASDAQ: VNDA) Insight’s founder Vandana Hari told Bloomberg.
However, ongoing COVID-19 outbreaks in several countries are a grim reminder that fuel demand recovery remains uneven.
The dollar stabilized in early European trade Tuesday, after handing back some of the previous week’s gains during the previous session, with traders awaiting testimony from Federal Reserve Chair Jerome Powell in the wake of the central bank’s hawkish turn.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.002, bouncing after dropping 0.5% on Monday.
USD/JPY was up 0.1% at 110.44, EUR/USD dropped 0.1% to 1.1904, after gaining 0.4% overnight, GBP/USD fell 0.2% to 1.3906, trying to hold on to its overnight bounce, while the risk-sensitive AUD/USD was down 0.3% at 0.7514.
The dollar had gained sharply since Wednesday’s move by the U.S. Federal Reserve, the country’s central bank, to bring forward the median expected starting point for interest rate rises to 2023, a year earlier than previously guided, while also starting to discuss the timetable for reducing the Fed’s massive bond-buying program.
The dollar index gained 1.9% last week, its biggest weekly rise since March 2000, and it was perhaps understandable that traders cashed in some of those gains during Monday’s session.
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