LONDON: Gold eased below $1,800 on Tuesday as the dollar hit 16-month highs and Treasury yields firmed, with expectations that US interest rates will rise next year shored up by the renomination of Federal Reserve Chairman Jerome Powell.

Spot gold was down 0.4% at $1,797.16 per ounce by 1022 GMT, while US gold futures eased 0.5% to $1,797.70.

The dollar index hit a fresh 16-month peak and US Treasury yields firmed after Powell was nominated for a second term as Fed Chair, adding to confidence that the US central bank will lift interest rates in 2022.

While gold is considered a hedge against inflation and other uncertainties, a likely hike in rates to rein in rising consumer prices would increase the opportunity cost of holding non-yielding bullion.

But it’s “too early to write off gold”, said Ross Norman, an independent analyst.

“Inflation still has legs to run, and there are COVID-19 restrictions in Europe once again. But the onus is on the bulls to prove their case and garner support, failing which the metal could drift lower again,” Norman added.

Rising COVID-19 cases in parts of Europe, which prompted restrictions, have kept investors on the edge.

Gold’s fall was a ‘knee-jerk’ reaction to the dollar, said Stephen Innes, managing partner at SPI Asset Management. Strength in the US currency dims the metal’s appeal for overseas buyers. “There isn’t going to be any sudden hawkish shift due to the nomination, but a continuation of current policy with a quicker taper tabled by officials last week,” Innes added.

Elsewhere, spot silver fell 1.1% to $23.89 per ounce, platinum was down 0.8% at $1,003.59, and palladium shed 0.4% to $1,946.38.