Gold inched higher on Monday, as elevated U.S. inflation lifted its safe-haven appeal, while investors awaited a Federal Reserve meeting to learn how quickly the central bank planned on unwinding its bond-buying programme.
Spot gold was up 0.2% at $1,785.20 per ounce, as of 0757 GMT, after rising as much as 0.8% on Friday. U.S. gold futures were up 0.1% at $1,785.70 per ounce.
With the market pricing in the Fed moving forward into a rate hike cycle, it is sufficient for gold to be counted as a defensive asset right now, said Stephen Innes, managing partner at SPI Asset Management. “And that’s why it’s continuing to hold the bid,” he said.
“The dot plot this week is really going to be the driving force. Three dot plots – gold goes down below $1,770. The dollar weakens on two dot plots and gold moves to the top side range of $1,810.”
The Fed is likely to announce a faster tapering of bond purchases, but more pronounced concerns over inflation or an aggressive “dot plot” could roil markets.
Although gold is considered an inflation hedge, reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of bullion, which pays no interest.
“Overall, the market is in a wait-and-watch mode on the Fed outcome on Dec. 15,” said Jigar Trivedi, a commodities analyst at Mumbai-based broker Anand Rathi Shares.
Investment demand has held steady despite concerns over the Omicron coronavirus variant, and gold could end the year at $1,760, Trivedi said.
U.S. consumer prices rose further in November as the cost of goods and services increased broadly amid supply constraints, leading to the largest annual gain since 1982.
Spot gold is poised to break a resistance at $1,789 per ounce, and rise towards the next resistance at $1,805, according to Reuters technical analyst Wang Tao.
Spot silver rose 0.3% to $22.22 per ounce while platinum gained 0.5% to $946.74 and palladium added 0.5% to $1,769.61.