Futures & Commodities

Gold gains as inflation risks boost safe-haven appeal

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Pure 1,000-gram gold bars produced by South Korea's LS-Nikko are stacked in a dealers room in Seoul on January 9, 2009.
KIM JAE-HWAN | AFP | Getty Images

Gold prices climbed to a more than one-week high on Monday, supported by inflation worries and lingering geopolitical risks, as markets awaited key U.S. inflation data for cues on the Federal Reserve's interest rate hike trajectory.

Spot gold was up 0.4% at $1,813.93 per ounce, after hitting its highest level since Jan. 27 at $1,816.86 earlier in the session. U.S. gold futures gained 0.4% to $1,814.70.

"There's a bit more flight-to-safety buying in the gold market... The main concern right now is where are we headed with inflation and how aggressive the Fed will be," said Bob Haberkorn, senior market strategist at RJO Futures.

Benchmark 10-year U.S. Treasury yields hovered near their highest levels since December 2019 after an upbeat U.S. employment report on Friday.

U.S. inflation figures for January are due on Thursday, with markets now pricing in a one-in-three chance the Fed might hike by a full 50 basis points in March. Although gold is considered a hedge against higher inflation and a safe store of value in times of uncertainty, higher rates raise the opportunity cost of holding non-yielding bullion.

Russia-Ukraine tensions are also on the back of everyone's minds, Haberkorn said.

U.S. President Joe Biden and German Chancellor Olaf Scholz will underscore their unity in opposing any Russian aggression against Ukraine when they meet at the White House on Monday, amid U.S. warnings that a Russian invasion could happen in days or weeks.

Gold and silver prices were also boosted by a weaker U.S. dollar.

Meanwhile, speculators cut their net long COMEX gold position in the week to Feb. 1, data showed on Friday.

Among other precious metals, silver jumped 1.6% to $22.84 per ounce, platinum declined 1.1% to $1,012.71, and palladium dropped 2.8% to $2,222.06.