Gold ticks higher on inflation anxiety, but firm dollar caps gains

Gold ticks higher on inflation anxiety, but firm dollar caps gains

Gold prices rose on Thursday, boosted by rising inflationary pressures in the U.S. but gains were limited as the dollar recovered and U.S. Treasury yields rose after Federal Reserve policymakers hinted at a potential policy change.

Spot gold rose 0.3% to $1,875.74 per ounce by 0525 GMT. U.S. gold futures fell 0.3% to $1,876.20.

“What’s driving gold and will continue to drive it higher from here is the fact that inflation is now very ingrained. But the Fed doesn’t seem to see it,” ED&F Man Capital Markets analyst Edward Meir said.

Gold prices rose more than 1% on Wednesday to their highest level since January 8 but lost most of those gains as the dollar index rebounded from a near three-month low and benchmark Treasury yields jumped after the Fed minutes were released.

Higher Fed rates would reduce gold’s appeal, as this would translate into higher opportunity costs for holding the non-yielding asset.

Spot gold may retest a resistance at $1,893 per ounce, according to Reuters technical analyst Wang Tao.

Palladium gained 0.9% to $2,894.14 per ounce, silver was steady at $27.76, while platinum rose 0.4% to $1,195.09.

Damon Harrison
Market Analyst, IPG Group