Gold prices climb, US dollar pull back seen ahead of Federal Reserve Chair Jerome Powell's testimony

The prices of gold climbed for a third session on Tuesday as the US Dollar and treasury yields retreated ahead of Federal Reserve Chairman Jerome Powell's nomination hearing as bets grew for a quicker pace of US interest rate hikes.

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Spot gold rose 0.22% to $1,805.36 per ounce by 1135 GMT (5:05 pm). Meanwhile, US gold futures rose 0.4% to USD 1,805.00.

"While risk-on sentiment normally is negative for gold, rising oil prices and concerns that U.S. inflation might stay higher for longer are keeping the gold price above the $1,800/oz mark," UBS analyst Giovanni Staunovo said.

Gold is often seen as a hedge against oil-led inflation, while higher interest rates increase the opportunity cost of holding non-yielding bullion.

Powell's pledge

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

The declining bond yields and a weaker U.S. dollar were also pushing up gold prices, 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 as markets await Powell for clues on the timing of monetary policy tightening.

"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 US core CPI data on Wednesday that is expected to have risen by an annual 5.4% in December, from 4.9% in the prior month.

An estimate beat could cement bets on a fourth-rate hike for 2022, which should weaken gold prices, Venketas added.

(With Reuters inputs)