Gold firms after US CPI surge; strong dollar limits gains

[BENGALURU] Gold edged higher on Tuesday following data showing US consumer prices rose by the most in 13 years last month, though an advancing dollar kept the metal confined to a tight range.

Spot gold was up 0.3 per cent at US$1,812.05 per ounce by 9.43am EDT. US gold futures rose 0.4 per cent to US$1,813.00.

The closely-watched US consumer price index (CPI) increased 0.9 per cent last month, the largest gain since June 2008. That compares with a forecast for overall CPI to rise 0.5 per cent by economists polled by Reuters.

But analysts said the data was unlikely to trigger a swift monetary policy tightening response from the Fed, providing some support to the non-yielding metal.

"It's going to take a string of these hotter numbers on the inflation readings to move the needle for the Fed. One month's reading is not going to do it," said Jim Wyckoff, senior analyst with Kitco Metals, adding the Fed would also take employment and growth readings into account.

Still, markets will now eye Fed Chairman Jerome Powell's testimony before Congress on Wednesday and Thursday for any hints on the central bank's eventual tapering of asset purchases.

"With the cost of transport also rising and oil prices remaining elevated, there is a risk that inflation could remain stubbornly high for longer than the Fed envisages," said Fawad Razaqzada, analyst with ThinkMarkets.

"If the current trend for inflation continues then surely the central bank will have to react and sooner," weighing on gold, he added.

Limiting gold's gains, the dollar index jumped 0.4 per cent against its rivals, denting gold's appeal to holders of other currencies.

Elsewhere, silver shed 0.6 per cent to US$26.03 per ounce, palladium dropped 0.6 per cent to US$2,838.38 and platinum fell 0.5 per cent to US$1,111.93.

REUTERS