10.01.202223:24 Forex Analysis & Reviews: Gold is slowly growing

Gold prices rose on Monday after Friday's correction. The growth continues despite the fact that the yield of benchmark US Treasury bonds has reached a two-year high, as traders hedge their positions against inflation and ongoing geopolitical risks.

Gold is slowly growing

The spot metal rose 0.3% to $1,800.76 an ounce, recovering slightly from Friday, when it reached its lowest level since December 16. U.S. gold futures also rose 0.2% to $1,800.30.

However, now the price of the precious metal is declining, following the general market trend. Comex futures were down 2 points to $1,795.

Gold is showing gains despite rising yields, indicating that the market is considering other factors such as the inflationary environment and geopolitical tensions, said Ole Hansen, an analyst at Saxo Bank.

Indeed, investors and traders are scared by the Federal Reserve's haste, and are actively reshaping their portfolios.

"The weakness in inventories has potentially also provided some support to the precious metals market," Hansen said, adding that yields will nevertheless remain in the spotlight this week, along with US inflation data.

The core US consumer price index is expected to rise 5.4% year-on-year in December, compared with 4.9% in the previous month, which may highlight the need for an earlier-than-expected increase in interest rates by the Fed.

Gold has traditionally been an insurance policy against higher inflation, but rising interest rates in the US are increasing alternatives due to the cost of storing unprofitable bullion. This does not affect the futures market so much, so gold hedging remains one of the most attractive methods.

Rising yields put pressure on all stock markets on Monday, as investors worried about the prospect of higher interest rates in the United States.

According to Hansen, although there is a possibility that yields may rise even above current levels, the bulk of the initial movement will potentially persist.

He added that the ongoing tensions between the United States and Russia over Ukraine and the unrest in Kazakhstan also cause geopolitical concerns.

In total, spot silver rose 0.6% to $22.44, platinum rose 0.4% to $958.51, and palladium rose 1.2% to $1957.18.

UBS expects platinum prices to rise to $1,150 per ounce by the end of 2022, while palladium prices will recover to $2,000 per ounce.

"We have a positive outlook for both platinum and palladium, as we expect demand to recover due to the expected easing of restrictions on the automotive supply chain, including a shortage of chips, in 2022," the statement said.

In the raw materials market, strong demand for lead supports the yuan.