Gold scales over 1-month peak on mounting economic worries

GOLD prices hit a more than 1-month high on Monday (Jun 13), carrying momentum from a sharp gain in the previous session on concerns over a potential blow to the US economy from an aggressive Federal Reserve approach to combating inflation.

Spot gold firmed 0.1 per cent to US$1,872.53 per ounce, as of 12.59 am GMT, while US gold futures edged 0.1 per cent higher to US$1,876.60.

Gold is seen as a safe-haven in times of economic crises, and hit its highest since May 9 earlier in the session at US$1,877.05 per ounce.

However, benchmark US 10-year Treasury yields also rose to their highest since May 9, capping demand for zero-yield gold. Also limiting gains in greenback-priced gold, the dollar climbed to its highest in nearly 4 weeks.

Gold prices saw volatile trading on Friday, as focus turned to economic risks after elevated US inflation readings bolstered bets for aggressive interest rate hikes.

Global equity markets slumped and the dollar strengthened on Friday after a bigger-than-expected US inflation spike in May raised concerns the Federal Reserve may tighten policy for too long and cause a sharp slowdown.

US consumer prices accelerated in May, suggesting that the country’s central bank could continue with its 50 basis points interest rate hikes through September to combat inflation.

It’s a central-bank heavy week ahead, with the Fed expected to deliver its second straight half-point rate hike to bring inflation under control.

Bullion is often seen as an inflation hedge, but the opportunity cost of holding it is higher when the Fed raises short-term interest rates, as gold yields no interest.

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Spot silver dipped 0.9 per cent to US$21.68 per ounce, platinum fell 0.6 per cent to US$967.67, and palladium dropped 1.3 per cent to US$1,909.49. REUTERS