* U.S. Treasury yields hit highest in nearly a year
* Dollar scales 0.2% on higher yields
* Markets await Powell’s testimony to Congress starting Tuesday (Recasts, adds analyst comment, updates prices)
By Diptendu Lahiri
Feb 22 (Reuters) – Gold
Spot gold rose 0.8% to $1,796.10 per ounce by 1044 GMT. It had fallen to $1,759.29 on Friday, its lowest since July 2. U.S. GCv1 gained 0.7% to $1,793.
“The market is playing inflation outlook story and gold is rising as a hedge against it,” said Quantitative Commodity Research analyst Peter Fertig, adding that gold’s future is now dependent on the rate at which inflation rises.
“However, higher bond yields are negative for gold, but they are also lending support to the dollar, offsetting some gains in the precious metal.”
The dollar gained in early European trading as expectations for a faster economic growth due to expected fiscal aid sent bond yields higher. USD/ US/
A $1.9 trillion stimulus is widely expected to pass by the end of the week, lifting sentiments for an increased economic recovery, but at the cost rising inflation.
Investors are also eyeing the testimony of Federal Reserve Chairman Jerome Powell on the Semiannual Monetary Report to Congress beginning Tuesday. Fed and other major central banks have pinned their hopes on ultra low interest rates to get the economy out of the grasp of a COVID-19-led fall-out.
Higher yields and lower interest rates increase the opportunity cost of holding non-yielding bullion.
“The bearish trend (in gold) of the last few days is losing strength but a proper inversion would require a solid recovery of $1,800,” ActivTrades chief analyst Carlo Alberto De Casa wrote in a note.
gained nearly 1% to $27.48 per ounce, while platinum fell 0.1% to $1,272.79.
Palladium was down 0.4% to $2,367.80, having earlier hit an over one-month high at $2,431.50.