Gold hits 2-month peak as dollar shrinks back

Gold rose to a two-month high on Monday bolstered by a retreat in the dollar and persistent inflation concerns after key central banks indicated that interest rates would remain low in the near term.

Spot gold was up for the third straight session, rising 0.3 percent, to $1,821.60 per ounce after hitting $1,825.87, a peak since Sept. 7. US gold futures rose 0.3 percent, to $1,822.70.

Boosting gold’s appeal for those holding other currencies, the dollar index eased 0.2 percent.

Major central banks are still overall accommodative, and all the cash in the system looking for a home is moving more into the gold and silver market as an inflation hedge, according to Jim Wyckoff, senior analyst at Kitco Metals.

Bullion jumped nearly 2 percent on Friday after the US Federal Reserve maintained its view that “transitory” inflation would likely not require a fast rise in interest rates, while the Bank of England shocked markets by holding rates.

Gold, considered an inflation hedge, has been benefiting from an ultra-low interest rate environment to spur growth during the pandemic, since they translate into reduced opportunity cost of holding the non-yielding bullion.

However, worries that central banks will start tightening policy to combat rising prices have kept investors on the lookout for economic data.

Tightness in the labor market combined with dislocation in global supply chains could result in another high reading for US consumer prices due on Wednesday.

“Wednesday’s data is likely to favor gold as inflation could show the fastest rise since 1990,” likely triggering buying interest in bullion, said Sugandha Sachdeva, vice president of commodity & currency research at Religare Broking.

“Going forward, we see $1,865-per-ounce levels as a short-term price target,” Sachdeva added.

Elsewhere, spot silver rose 0.7 percent, to $24.35 per ounce. Platinum rose 2.4 percent, to $1,059.50. Palladium gained 0.3 percent, to $2,041.31 per ounce.