Gold Extends Gains As U.S. Inflation Surges

Gold prices edged higher on Thursday, extending a rally fuelled by a surge in U.S. consumer prices that spurred some demand for the metal as an inflation hedge.

Spot gold rose 0.3% to $1,855.41 per ounce by 0821 GMT. U.S. gold futures gained 0.5% to $1,858.00.

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

“Concerns about more persistent inflation or even the potential for stagflation is buttressing inflation hedge demand for TIPS, gold, and crypto, which could continue thematically in the short term as November CPI should keep showing underlying strength,” analysts at Citi said in a note.

The bank raised its 0-3 month gold price target to $1,900 and expects the metal to average $1,800 in the fourth quarter.

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

DailyFX currency strategist Ilya Spivak said prices could head lower as markets digest the CPI data, especially amid concerns that the U.S. Federal Reserve could tighten its policy more aggressively.

Interest rate hikes to cool inflation should weigh on gold as they would raise the non-yielding metal’s opportunity cost.

Several Fed officials this week expressed growing concerns over more long-lasting inflation, even as they expect price increases to eventually subside.

“We are heading towards very challenging times with an economic slowdown appearing imminent and gold Exchange Traded Fund (ETF) demand should bounce back, supporting prices this year,” Kunal Shah, head of research at Nirmal Bang Commodities said, adding that expects gold to rise to $1,900 in coming months.

– Reuters