Gold holds advance as investors zero in on outlook for inflation

[SINGAPORE] Gold held a weekly gain as investors weighed the outlook for inflation in the US for clues on the likely pace of interest rate increases by the the Federal Reserve in 2016.

Bullion for immediate delivery traded at US$1,076.33 an ounce at 8:36 am in Singapore from US$1,076.10 on Thursday, when it rose 0.5 per cent, according to Bloomberg generic pricing. The metal gained 0.9 per cent last week.

Gold has retreated 9.1 per cent this year as the US economy improved, which prompted the Fed to tighten monetary policy in December for the first time in almost a decade. US central bankers have said that they will proceed gradually with additional moves next year. While a pickup in the pace of price gains may spur demand for gold as a hedge, rising inflation may induce higher rates, which typically hurt bullion.

"The market will be watching US inflation data closely," Huatai Great Wall Futures said in a note on Monday. A rise in inflation expectations will bolster the case for further Fed rate rises, impacting precious metals, the brokerage said.

The US central bank's preferred inflation index was at 0.4 per cent in November, a report showed on Wednesday. It has been below the Fed's 2 per cent target for more than three years as commodities including oil tumbled.

BLOOMBERG