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PRECIOUS-Gold near 5-month high as inflation fears deepen

reuters.com · 11/11/2021 04:35
PRECIOUS-Gold near 5-month high as inflation fears deepen

Recast, adds comment and updates prices

U.S. CPI posts biggest annual gain in 31 years last month

Inflation data dealt a punch to team 'transitory' - analyst

By Arundhati Sarkar

- Gold prices rose on Thursday to near a five-month high hit in the previous session, after hot inflation reading out of the United States pushed investors towards the safety of the precious metal.

Spot gold XAU= rose 0.6% to $1,860.59 per ounce by 0909 GMT. U.S. gold futures GCv1 gained 0.8% to $1,863.30.

"Spot gold remains elevated after the latest U.S. CPI release dealt a gut punch to 'team transitory'", said Han Tan, chief market analyst at Exinity, adding that gold prices would be well supported as long as inflation fears continue to dominate sentiment.

Gold, seen as a hedge against inflation, rose as much as 2% to its highest level since mid-June on Wednesday after data showed U.S. consumer prices in October rose at their fastest pace in 31 years. nL1N2S11BJ

"(But) persistent inflation could translate into a faster cycle of U.S. rate hikes, testing the Federal Reserve's patient stance on policy tightening," Tan said.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest.

Strength in the metal came despite the dollar .DXY hitting an over 15-month high, making gold more expensive for holders of other currencies. USD/

Recent gains in bullion have been supported by a dovish tone taken by key central banks last week, with the Federal Reserve reiterating its view that inflation was "transitory" and would likely not require a fast rise in rates.

However, several Fed officials this week expressed growing concerns over more long-lasting inflation. nL1N2S120F

Among other metals, spot silver XAG= rose 1.2% to $24.91 per ounce. Platinum XPT= gained 1.4% to $1,082.00 per ounce, and palladium XPD= rose 1.5% to $2,050.23.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Ramakrishnan M.)

((Arundhati.Sarkar@thomsonreuters.com; twitter.com/Arundhati_05; +1 646 223 8780 Ext: 2776))