Gold price marches to 5-month peak as tune of inflation amplifies

Gold kept its hot streak going on Wednesday, rising by as much as 2% to a five-month high, after a surge in US consumer prices last month elevated bullion’s appeal as an inflation hedge.

Spot gold was up 1.1% at $1,852.36 per ounce by 12:18 p.m. EDT, having earlier hit its highest since June 15 at $1,857.09. Meanwhile, December gold futures rose 1.4% to $1,856.70 per ounce in New York.

[Click here for an interactive chart of gold prices]

“Once again we have hot inflationary data,” High Ridge Futures’ David Meger told Reuters. The brokerage firm’s director of metals trading went on to say:

“Gold being the quintessential hedge against inflation, we believe inflation is the underlying positive environment that will foster the gold market rally in the weeks and months ahead.”

US consumer prices increased more than expected in October as the cost of gasoline and food surged, leading to the biggest annual gain since 1990.

“This environment is a double-edged sword because as inflationary data continues to come out hotter than expected, the concern will be whether the Federal Reserve reduces liquidity faster than anticipated,” Meger added.

The rally came despite strength in the US dollar, which usually weighs on demand for precious metals from holders of other currencies.

Gold, now on course for a fifth straight day of gains, also drew support from a slide in real yields on US Treasuries and the overall risk-off sentiment that pushed down Wall Street’s main indexes.

“Its break above the key resistance level of $1,835 per ounce is important and a close above the $1,851 mark could ignite upward momentum towards $1,900,” according to Standard Chartered analyst Suki Cooper.

“Gold has a solid floor to build price momentum from given the seasonally strong demand from India,” she said.

(With files from Reuters)