Gold rises on inflation, geopolitical risks; focus on Fed meet

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Jan 24 (Reuters) – Gold prices rose on Monday, as investors sought cover of the safe-haven metal against inflation risks and concerns about Russia-Ukraine discord, while markets await cues on rate hikes from the U.S. Federal Reserve policy meeting this week.

Spot gold was up 0.3% at $1,837.91 per ounce, as of 0723 GMT. U.S. gold futures were up 0.3% at $1,836.60.

“Market is waiting for the (FOMC) statements. Crude oil is increasing, so inflation is expected to increase which is underpinning gold prices,” said Jigar Trivedi, a commodities analyst at Mumbai-based broker Anand Rathi Shares.

The Fed will tighten monetary policy at a much faster pace than thought a month ago to tame persistently high inflation, now viewed by economists polled by Reuters as the biggest threat to the U.S. economy over the coming year.

The U.S. central bank’s Federal Open Market Committee (FOMC) is scheduled to meet on Jan. 25-26.

Gold is generally seen as an inflationary hedge, but it is highly sensitive to rising U.S. interest rates, which increases the opportunity cost of holding non-interest-bearing bullion.

Benchmark U.S. 10-year Treasury yields fell on Friday, reducing the opportunity cost of holding non-interest bearing bullion.

Investors sought cover from worries about a possible extension of U.S. sanctions or new EU (European Union) measures if Russia attacks Ukraine, Phillip Futures analyst Avtar Sandu said in a note.

Russia will face severe economic sanctions if it installs a puppet regime in Ukraine, a senior British minister said on Sunday after the UK accused the Kremlin of seeking to install a pro-Russian leader there.

Spot gold may retest a resistance at $1,850 per ounce, a break above could lead to a gain to the range of $1,860 to $1,872, according to Reuters’ technical analyst Wang Tao.

Spot silver fell 0.6% to $24.09 an ounce. Palladium was flat at $2,109.29 and platinum was up 0.1% at $1,030.24.

(Reporting by Asha Sistla in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)

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