Gold firms near 5-month peak on persistent inflation bets

Gold prices rose on Tuesday, holding close to an over five-month peak hit in the previous session as investors feared that inflation would persist for longer, driving demand for bullion as a hedge against inflation

Spot gold rose 0.1% to $1,864.80 per ounce by 0836 GMT. U.S. gold futures were up 0.1% at $1,868.20

Gold prices have rallied 1.9% since last Tuesday after data showed U.S. consumer prices accelerated in October.

“The notion that U.S. inflation has yet to peak should keep bullion well bid, as long as the Fed doesn’t veer from its patient approach to any rates lift off,” said Han Tan, chief market analyst at Exinity

Gold’s gains also came despite the dollar holding close to a 16-month high and benchmark U.S. 10-year Treasury yields steadying near a three-week peak

A stronger dollar increases gold’s cost to buyers holding other currencies

“Gold is able to resist the headwind of a strong dollar and could rise to $1,900 by the end of the year,” Commerzbank analyst Daniel Briesemann said

Investors now eye U.S. retail sales data due at 1330 GMT, which could influence the Federal Reserve’s stance on interest rates hikes. The data follows last week’s weak consumer sentiment reading

“Further signs that the U.S. economic recovery is waning amid persistently elevated consumer prices could prompt more investors towards gold as a safe haven,” Exinity’s Tan added

Meanwhile, Richmond Federal Reserve President Thomas Barkin said on Monday that while the Fed will not hesitate to raise interest rates, the central bank should wait to gauge if inflation and labor shortages prove to be more long-lasting

Rate hikes tend to weigh on gold, as they push bond yields up, raising the metal’s opportunity cost