PRECIOUS-Gold gains as U.S. dollar, yields pull back before Powell testimony

BY Reuters | ECONOMIC | 01/11/22 05:31 AM EST

(Adds comments, details, and updates prices)

* Investors await U.S. CPI data due on Wednesday

* U.S. 10-yr Treasury yield inches away from 2-year high

By Seher Dareen

Jan 11 (Reuters) - Gold prices gained for a third straight session on Tuesday, as the dollar and Treasury yields retreated ahead of the Federal Reserve Chair Jerome Powell's nomination hearing as bets for quicker U.S. interest rate hikes grow.

Spot gold rose 0.3% to $1,805.87 per ounce by 1027 GMT. U.S. gold futures rose 0.4% to $1,806.10.

"Declining bond yields and a weaker U.S. dollar are pushing up gold prices above $1,800 this morning," said Carsten Fritsch, a commodities analyst at Commerzbank.

The yield on 10-year Treasury notes backed off an almost two-year high and the U.S. dollar was lower against major peers.

Powell pledged "to prevent higher inflation from becoming entrenched" in comments prepared for delivery at his nomination hearing before the Senate Banking Committee for a second four-year term as head of the Fed on Tuesday.

"The manner in which Mr. Powell responds to these questions could hint at the 'hawkishness' of the Fed and consequently give markets some directional bias going forward," said DailyFX analyst Warren Venketas.

Focus then turns towards the U.S. core CPI data on Wednesday that is expected to have risen by an annual 5.4% in December, up from 4.9% in the prior month.

"An estimate beat could increase markets rate hike expectations and cement the much talked about 4th rate hike for 2022. Again, this should weaken gold prices," Venketas added.

Gold is considered a hedge against high inflation, but the metal is highly sensitive to rising U.S. interest rates which increase the opportunity cost of holding non-yielding bullion.

Spot silver rose 0.3% to $22.51 an ounce, platinum was little changed at $940.03, and palladium rose 0.9% to $1,929.06. (Reporting by Seher Dareen in Bengaluru; editing by David Evans)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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