Gold extends gains as US inflation rises

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Gold prices edged up on Thursday, continuing a rally fueled by a surge in consumer prices in the United States that has boosted some demand for the metal as a hedge against inflation.

Spot gold rose 0.2% to $ 1,852.90 an ounce at 7:10 am GMT. US gold futures gained 0.3% to $ 1,854.30.

The metal hit its highest level since June 15 on Wednesday after data showed U.S. consumer prices recorded their biggest annual gain in 31 years last month.

Also read: Stable prices and pent-up demand push gold purchases to pre-Covid levels

“Gold is expected to rise from here due to higher inflation expectations and a slowdown in the US and Chinese economies,” said Kunal Shah, head of research at Nirmal Bang Commodities, adding that the metal could reach $ 1,900 in the short term.

Gold also gained despite the dollar hitting its highest level in a year and benchmark 10-year US Treasury yields are rising.

DailyFX currency strategist Ilya Spivak said prices could come down as markets digest CPI data, especially amid fears the US Federal Reserve could tighten policy more aggressively.

Interest rate hikes to curb inflation should weigh on gold as they increase the opportunity cost of the unproductive metal.

“If inflation expectations take hold, it could start to impact consumption, potentially causing stagflation. But gold is unlikely to benefit as monetary policy would be uncertain in such a scenario and investors are unlikely to be comfortable with this level of uncertainty, ”Spivak said.

Growing concerns

Several Fed officials this week expressed growing concerns about more lasting inflation, even though they expect price increases to moderate eventually. “We are still heading for a very difficult time with an economic downturn appearing to be imminent and demand for Exchange Traded Fund (ETF) gold is expected to rebound, supporting prices this year,” said Shah of Nirmal Bang.

Spot silver rose 1.1% to $ 24.90 an ounce. Platinum gained 1.1% to $ 1,079.37 and palladium climbed 0.4% to $ 2,029.03


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