Gold price edges up on a weaker dollar

Yellow metal sees limited gains as US inflation data triggers rate hike fears

Three companies that are part of the unnamed gold trading group were each fined Dh450,000, the Ministry of Economy said. Reuters
Three companies that are part of the unnamed gold trading group were each fined Dh450,000, the Ministry of Economy said. Reuters

Gold prices edged higher on Friday due to a pullback in the dollar, though gains were curbed as data showing a rise in US inflation fanned fears of a sooner-than-expected rate hike.

Spot gold was up 0.2 per cent at $1,829.61 per ounce by 10.26am UAE time. US gold futures rose 0.2 per cent at $1,827.40.

The metal traded flat for the week.

The dollar index was down 0.1 per cent against its rivals, making gold cheaper for other currency holders.

Inflation is not necessarily bad for gold, however, it’s bad if the central banks start to act on it, and the market is getting a little bit jittery thinking that this could bring forward the US Federal Reserve’s taper a little bit

Stephen Innes, managing partner, SPI Asset Management

“Inflation is not necessarily bad for gold, however, it’s bad if the central banks start to act on it, and the market is getting a little bit jittery thinking that this could bring forward the US Federal Reserve’s taper a little bit,” Stephen Innes, managing partner at SPI Asset Management, said.

Key US economic readings this week showed a bigger-than-expected rise in consumer prices and weekly jobless claims dropping to a 14-month low, intensifying concerns over rising inflation and prospects of a rise in interest rates.

Higher interest rates increase the opportunity cost of holding bullion.

“Right now we haven’t had any inclination that the Fed is about to move anytime soon, I think gold still remains relatively supported,” Mr Innes said, adding that strong economic data still remains a key concern.

The US central bank has pledged to keep interest rates low until the economy reaches full employment, and inflation is on track to “moderately” exceed the 2 per cent level for some time.

“We’ll need some more clarity in terms of how persistent inflation is. If it turns out to be transitory, yields will remain lower,” Harshal Barot, a senior research consultant for South Asia at Metals Focus, said.

Investors now await US retail sales data due later in the day.

Elsewhere, palladium gained 1.8 per cent to $2,914.28 per ounce. Silver rose 0.1 per cent to $27.09, while platinum was up 0.9 per cent at $1,216.69.

Published: May 14, 2021 11:49 AM

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