Gold holds near one-week high after U.S. inflation data

Gold prices on Thursday held near a one-week high hit in the previous session, as the U.S. and Treasury yields retreated after inflation data came in line with expectations and reiterated the need for a quicker interest rate hike.

FUNDAMENTALS

* Spot gold was flat at $1,824.55 per ounce by 0109 GMT. U.S. gold futures were down 0.2% to $1,824.00.

* The consumer price index increased 0.5% last month, just above the 0.4% expectation, the Labor Department said on Wednesday. The CPI surged 7.0% in 2021, the biggest year-on-year increase since June 1982 but in line with the forecast of economists polled by Reuters.

* Following the inflation reading, the dollar fell to a two-month low, making gold more attractive for overseas investors.

* U.S. benchmark 10-year yields also slipped, moving away from two-year highs hit earlier in the week. Lower yields reduce the opportunity cost of holding non-interest bearing gold.

* Investors and analysts now expect the U.S. central bank’s policy-setting Federal Open Market Committee (FOMC) to raise its benchmark overnight interest rate from the current near-zero level at its March meeting, and continue with three more quarter-percentage-point increases over the year.

* Gold is considered an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates which increase the opportunity cost of holding non-yielding bullion.

* Zimbabwe’s gold production rose by 55.5% in 2021, central bank data showed on Wednesday, as government moves to incentivise miners bore fruit.

* Spot silver was up 0.1% at $23.14 an ounce, platinum climbed 0.1% to $978.09, and palladium shed 0.2% to $1,906.48.