Gold Steadies As Dollar Retreats After U.S. Inflation Data

Jan 12 (Reuters) – Gold steaded on Wednesday, buoyed by a retreat in the dollar after U.S. inflation data, although bullion’s gains were offset by improved appetite for riskier assets since the rise in consumer prices were mostly in line with expectations.

Spot gold was little changed at $1,823.34 per ounce at 10:14 ET (1514 GMT), after posting its biggest one-day percentage rise since mid-December on Tuesday. U.S. gold futures rose 0.2% to $1,821.80.

U.S. consumer prices rose in December, with inflation near a four-decade peak, buoying gold’s appeal as an inflation hedge.

The dollar (.DXY) fell to a two-month low after the data, making gold more attractive for overseas investors, while the U.S. benchmark 10-year yields were also subdued.

The headline inflationary data coming in hotter than expected is supportive of gold and we continue to see these inflationary pressures building, supporting gold’s status as a hedge in the weeks ahead, said David Meger, director of metals trading at High Ridge Futures.

Gold could push above technical resistance around $1,830, Meger added.

But, it was a mixed bag for gold since the elevated inflation could also bolster expectations that the U.S. Federal Reserve will raise interest rates, which would in turn increase the opportunity cost of holding non-interest bearing bullion. read more

Also capping gold’s advance were gains in Wall Street as some investors felt the Fed may not hike rates as fast as expected, since the rise in inflation was mostly in line with analysts’ expectations and likely priced in.

TD Securities analysts said in a note that gold’s resilience may be explained by strong physical demand and the markets having already priced in nearly 3.5 Fed hikes by December, along with a more aggressive pace of tapering.

Spot silver was up 1.3% to $23.05 an ounce, platinum was 1% higher at $980.77 and palladium rose 1.3% to $1,946.61.

Reporting by Kavya Guduru in Bengaluru; Editing by Shailesh Kuber

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