Gold extends gains on US inflation data, focus on central bank meetings

[BENGALURU] Gold inched higher on Monday (Dec 13) as elevated US consumer prices lifted its appeal as an inflation hedge, while investors awaited a flurry of central bank meetings this week, including by the US Federal Reserve, for further direction.

Spot gold rose 0.2 per cent to US$1,786.51 per ounce by 2.13 am GMT, after Friday's 0.8 per cent gain. US gold futures were up 0.2 per cent to US$1,787.70.

US consumer prices increased further in November as the cost of goods and services rose broadly amid supply constraints, leading to the largest annual gain since 1982.

The dollar index was quiet at the start of a week in which central bank meetings will likely drive currency markets.

The Fed is widely expected to signal a faster tapering of asset buying this week, and thus an earlier start to rate hikes.

The European Central Bank and the Bank of Japan are set to review their monetary policies this week.

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

The European Central Bank is set to halve the amount of assets it buys each month from April, according to a Reuters poll.

Top Asian hubs saw healthy demand for physical gold last week as domestic prices retreated into the year-end, although volatility in rates deterred retail buyers and jewellers in India.

Spot silver rose 0.4 per cent to US$22.26 an ounce.

Platinum was flat at US$942 and palladium gained 1.4 per cent to US$1,786.54.

REUTERS