Gold Rises on Inflation Signs

Gold futures on Monday traded modestly higher as signs of growing inflation helped bolster prices. A packed week of economic data and a meeting of the Federal Reserve may also influence the trajectory of the yellow metal.

A closely watched reading on the labor market is due on Friday and a two-day meeting of the Fed is set to kick off Tuesday. Both key events, among others, could alter expectations for interest-rate increases, drive the dollar and assets pegged to it like gold.

On Monday, February gold GCG7, +0.32% the front-month contract, was up $4.10, or 0.4%, at $1,192.30 an ounce, and the most active contract for April GCJ7, +0.33%  also was trading around the same level.

Early Monday, a reading of consumer inflation, as measured by the Fed’s preferred metric, personal-consumption expenditures, rose in December to the strongest reading in more than two years. The PCE rose 0.2% and the overall annual rate rose to 1.6%, marking the best rate since September 2014, the Commerce Department data show. Consumer spending also rose 0.5% in the month, matching Wall Street estimates, but representing the biggest spending increase in December since the past month of 2009.

Gold tends to be viewed as a hedge against rising inflation.

The yellow metal ended lower Friday for a fourth day in a row, losing more than 1% for the week as strength in the dollar and recent all-time highs in major U.S. stock indexes dulled demand for haven investments.

The ICE U.S. Dollar Index DXY, +0.37% a gauge of the buck against a basket of 6 currencies, was gaining modestly early Monday in New York, up 0.3% at 100.84. A stronger dollar can make assets priced in the currency more expensive to buyers using other monetary units.

via MarketWatch

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