Gold prices extended a rally to hit a two-month high on Monday as investors held onto the view that central banks would keep interest rates low for the time being, with focus turning to key U.S. inflation data due later in the week.
Spot gold rose 0.2% to $1,819.52 per ounce by 0623 GMT, having hit its highest since Sept. 7 earlier in the session. U.S. gold futures gained 0.3% to $1,822.10.
Major central banks last week stuck to the view that current inflationary pressures would fade, dimming the prospect for faster rate hikes.[
Analysts said a better-than-expected U.S. payrolls report on Friday was also unlikely to change the Fed’s dovish stance, with market participants now focusing on Wednesday’s key Consumer Price Index reading.
“Inflation data will have to be markedly above expectation for any sort of jolt back into the fear of higher interest rates, but as long as it comes out in line with or slightly above expectations, I don’t think anybody will panic,” IG Markets analyst Kyle Rodda said.
Rodda said a break above $1,830 could drive a rally towards $1,900 in gold, though it would likely trend lower in the long term as central banks eventually tighten policies to control high inflation.
Gold benefits from lower interest rates as they reduce the opportunity cost of holding non-yielding bullion.
But Jeffrey Halley, a senior market analyst at OANDA, said in a note that gold’s rally could have attracted “the usual rush of trend-following and fast money buyers”.
“If past performance is a judge, none of that positioning is ‘sticky’ and those fast-money buyers will rush for the exit door and sell as soon as gold starts moving lower, causing another downside spike,” Halley said.
Spot silver rose 0.4% to $24.27 per ounce. Platinum gained 0.7% to $1,041.66 and palladium climbed 0.8% to $2,050.78.
(Reporting by Nakul Iyer in Bengaluru; Editing by Ramakrishnan M. and Subhranshu Sahu)
