Gold scales a near four-month high; Brent crude tops $70 a barrel

Gold scaled a near four-month peak on Tuesday supported by a weaker US dollar, while non-yielding bullion also attracted investors seeking an inflation hedge. Brent oil, too, topped $70 a barrel with optimism building about the demand outlook in key regions, such as the US and Europe, but later declined.

Spot gold was up 0.15 per cent at $1,869.20 per ounce at 7 pm IST, after hitting its highest since January 29 earlier in the session. Gold in Delhi rose by Rs 333 to Rs 47,833 per 10 gram in line with a rally in the global precious metal, according to HDFC Securities.

"The narrative is clearly shifting towards inflation ... but perhaps more critically, you have got the dollar weakness, which is probably the key and prime driver," said analyst Ross Norman. The dollar index fell to a near three-month low, making gold cheaper for other currency holders.

Analysts also noted that inflows into gold exchange-traded funds indicated that investors were buying gold to hedge against inflation worries. Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, rose 0.7 per cent to 1,035.93 tonne on Monday, the highest since late March.

Oil also maintained its upward trajectory as Brent crude, the global benchmark, added as much as 1.1 per cent, reaching its highest level since March 8, but eased slightly later.  At 7 pm IST, Brent crude was trading at $69.37 a barrel, while WTI crude was at $66.08 per barrel.

Oil has joined other commodities in a blistering rally this year, emerging as a hedge against inflation, and with demand rebounding from the depths of the pandemic. In the US even the lagging aviation industry is showing signs of picking up. There’s optimism in Europe, too, with transport gauges recovering and helping offset the spread of the coronavirus in parts of Asia, most notably India.

“Hopes of a rise in demand and a weaker dollar are pushing oil prices higher,” said Hans van Cleef, senior energy economist at ABN Amro. “Fundamentally there are no reasons for a further rally. There is more than enough supply available to meet any rise in demand for the coming two-three years.”