Gold holds near 1-week high after US inflation data

[BENGALURU] Gold prices on Thursday (Jan 13) held near a 1-week high hit in the previous session, as the US dollar and Treasury yields retreated after inflation data came in line with expectations and reiterated the need for a quicker interest rate hike.

Spot gold was flat at US$1,824.55 per ounce by 1.09 am GMT. US gold futures were down 0.2 per cent to US$1,824.

The consumer price index increased 0.5 per cent last month, just above the 0.4 per cent expectation, the Labor Department said on Wednesday. The CPI surged 7 per cent in 2021, the biggest year-on-year increase since June 1982 but in line with the forecast of economists polled by Reuters.

Following the inflation reading, the dollar fell to a 2-month low, making gold more attractive for overseas investors.

US benchmark 10-year yields also slipped, moving away from 2-year highs hit earlier in the week. Lower yields reduce the opportunity cost of holding non-interest bearing gold.

Investors and analysts now expect the US central bank's policy-setting Federal Open Market Committee (FOMC) to raise its benchmark overnight interest rate from the current near-zero level at its March meeting, and continue with 3 more quarter-percentage-point increases over the year.

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising US interest rates which increase the opportunity cost of holding non-yielding bullion.

Zimbabwe's gold production rose by 55.5 per cent in 2021, central bank data showed on Wednesday, as government moves to incentivise miners bore fruit.

Spot silver was up 0.1 per cent at US$23.14 an ounce, platinum climbed 0.1 per cent to US$978.09, and palladium shed 0.2 per cent to US$1,906.48.

REUTERS