Gold nears 5-month peak as inflation worries boost appeal

Gold prices neared a five-month high touched in the previous session, after strong U.S. consumer price data prompted a rush into the precious metal seen as a hedge against inflation.

Spot gold was up 0.6% at $1,861.39 per ounce. U.S. gold futures for December delivery settled 0.8% higher at $1,863.90 per ounce.

“The market is spooked with yesterday’s CPI data coming in as high as it was. Traders are looking at gold as being a safety asset, as a hedge against this inflation risk,” said Bob Haberkorn, senior market strategist at RJO Futures.

Gold rose as much as 2% on Wednesday and hit its highest level since mid-June, after data showed U.S. consumer prices rose at their fastest pace in 31 years in October, underscoring signs inflation could stay uncomfortably high well into 2022.

“The reading that we saw yesterday could be another push back up to $1,900 an ounce for gold,” Haberkorn said, adding the market does not believe a rate increase is on the cards right now.

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

Gold has scaled new peaks over the past few sessions after major central banks indicated last week interest rates would remain low in the near term, with the Federal Reserve maintaining its stance that inflation was “transitory”.

However, since then, Fed officials have raised concerns about longer-lasting inflation.

“While the narrative had developed in the wake of the FOMC meeting last week that the Fed would look through high inflation numbers… these numbers (CPI data) were sufficiently hot to jolt the market,” said Saxo Bank analyst Ole Hansen in a note.

Elsewhere, spot silver jumped 2.4% to $25.21 per ounce, its highest since Aug. 6. Platinum gained 1.9% to $1,087.35 per ounce and palladium rose 2% to $2,060.21.