Gold prices maintained an upward trend on Wednesday as both the U.S. dollar ad Treasury yields continue their downslide. The yellow metal remained close to a seven-week peak reached earlier this week.

The dollar index plunged to a seven-week low during the previous session and fell 0.1% today. It made the bullion less expensive and more attractive for investors using rival currencies. The benchmark 10-year Treasury yields dropped below 1.6% and lowered the opportunity cost of owning the non-yield metal. It also revived gold’s appeal as an inflation hedge.

Spot gold is currently trading at $1,779.84 per ounce as of 0915 GMT.

Jeffrey Halley, a senior market analyst at OANDA, noted that the decline in the dollar index supported the yellow metal’s upward trend. He predicted that if the Treasury yields remain low, the bullion could test a 100-day moving average of $1,802/oz.  Avtar Sandu of Phillip Futures added that the new driver for gold prices is geopolitics. He also mentioned that the Federal Reserve and other central banks might keep dovish monetary policy because of the renewed spikes in COVID-19 infections.

Meanwhile, in a letter to Senator Rick Scott, Federal Reserve Chairman Jerome Powell said that inflation could rise as the economy recovers. But he reaffirmed their commitment to limiting overshoot in their inflation target of a little over 2%. Powell also emphasized that the central bank is fully committed to achieving maximum employment and stable prices.

The Fed lowered the interest rate to near zero in March last year to support hiring and consumer spending. It has been buying $120 billion in Treasuries and mortgage-backed securities per month to keep the interest rates low. Powell promised to keep doing so until they have made substantial progress toward their employment and inflation targets.

In the world economy, the consumer price index in New Zealand in the first quarter rose higher than expected. In Japan, the central bank might trim down its inflation forecast for the current fiscal year. It is an indication that the Bank of Japan will maintain its massive stimulus program for the foreseeable future. Also, oil and stock prices fell on Tuesday amid the rising coronavirus cases. These developments favor the yellow metal.