Gold scales over 1-month peak on mounting economic worries

Gold prices hit a more than one-month high on Monday, carrying momentum from a sharp gain in the previous session on concerns over a potential blow to the U.S. economy from an aggressive Federal Reserve approach to combating inflation.

FUNDAMENTALS


* Spot gold firmed 0.1% to $1,872.53 per ounce, as of 0059 GMT, while U.S. gold futures edged 0.1% higher to $1,876.60.

* Gold is seen as a safe-haven in times of economic crises, and hit its highest since May 9 earlier in the session at $1,877.05 per ounce.

* However, benchmark U.S. 10-year Treasury yields

also rose to their highest since May 9, capping demand for zero-yield gold.

* Also limiting gains in greenback-priced gold, the dollar

climbed to its highest in nearly four weeks.

* Gold prices saw volatile trading on Friday, as focus turned to economic risks after elevated U.S. inflation readings bolstered bets for aggressive interest rate hikes.

* Global equity markets slumped and the dollar strengthened on Friday after a bigger-than-expected U.S. inflation spike in May raised concerns the Federal Reserve may tighten policy for too long and cause a sharp slowdown.

* U.S. consumer prices accelerated in May, suggesting that the country’s central bank could continue with its 50 basis points interest rate hikes through September to combat inflation.

* It’s a central-bank heavy week ahead, with the Fed expected to deliver its second straight half-point rate hike to bring inflation under control.

* Bullion is often seen as an inflation hedge, but the opportunity cost of holding it is higher when the Fed raises short-term interest rates, as gold yields no interest.

* Spot silver dipped 0.9% to $21.68 per ounce, platinum fell 0.6% to $967.67, and palladium dropped 1.3% to $1,909.49.

DATA/EVENTS (GMT, April)

0600 UK GDP Est 3M/3M 0600 UK GDP Estimate MM, YY 0600 UK Manufacturing Output MM