Gold inches higher as inflation worries fade

Bengaluru — Gold prices edged higher on Tuesday, supported by simmering concerns over inflation, though gains were capped by a firm dollar and the expectation that the US Federal Reserve will announce a tapering of its bond purchases in November.

Spot gold rose 0.3% to $1,758.25/oz by 3.53am GMT, while US gold futures were up 0.1% at $1,758.20.

“Gold is relatively resilient and all arrows are pointing back to stagflation versus economic growth [debate],” said Stephen Innes, managing partner at SPI Asset Management.

However, investors are reluctant to chase the move higher ahead of the minutes of the Fed’s September meeting, he said.

Limiting gold’s gains, the dollar hovered close to a one-year high touched in September amid surging energy prices and the expectation the Fed would soon start normalising policy.

The benchmark US 10-year treasury yield hit a peak since early June.

Gold is often viewed as an inflation hedge, but reduced central bank stimulus and interest rate hikes tend to push government bond yields up, translating into a higher opportunity cost for holding non-interest yielding bullion.

“Risks around slower growth against higher inflation still see a sustained strategic allocation to gold amid prevailing low rates backdrop,” analysts at ANZ Research said in a note, adding they expect bullion prices to reach $1,850 before retreating during 2022.

Meanwhile, inflation fears triggered by global energy crunch, and debt troubles at China Evergrande weighed on Asian shares.

Market participants now await the minutes of the Fed’s September 21-22 policy meeting and the consumer price index, both due later this week.

Spot silver rose 0.1% to $22.59/oz, while platinum was up 0.2% at $1,010.38.

Palladium fell 0.4% to $2,104.01, having hit its highest since September 10 at $2,182.67 on Monday.

Reuters