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Gold Tops Four-Month High on High Inflation Data

January 12, 2018 at 15:45 by Andrew Moran

Gold futures are trading at their best levels in four months. Following the release of higher-than-expected inflation data, which impacted US Treasury yields, the yellow metal climbed towards the $1,330 mark. Silver prices are also posting higher gains.

February gold futures rose $6.00, or 0.45%, to $1,328.50 per ounce at 14:29 GMT on Friday. Gold prices are settling at their highest levels since the middle of September, and are poised to record a 0.4% weekly jump.

Silver, the sister commodity to gold, surged above the crucial $17 threshold to end the trading week. March silver futures advanced $0.13, or 0.79%, to $17.10 an ounce. Despite the late-week increase, the white metal is on track for a weekly loss of 1%.

According to the Bureau of Labor Statistics (BLS), the core rate of consumer inflation, excluding energy and food, soared 0.3% in December. The 12-month inflation rate did tumble from 2.2% to 2.1% last month. This could impact the Federal Reserve moving forward, which has stated that it wants to raise interest rates three times in 2018.

Gold benefits from rising inflation because it serves as an investment hedge. The yellow metal would also take advantage of a US central bank slow to pull the trigger on rate hikes because gold is sensitive to a rising-rate environment since it lifts the opportunity cost and sends traders into yield-bearing assets.

The higher inflation data affected the US dollar as the greenback slipped 0.6%. A weaker US dollar is a boon for commodities like gold and silver because it makes it cheaper for foreign investors to acquire.

Analysts anticipate short-term gains for precious metals because of stronger demand from Asian markets ahead of the Chinese New Year.

With the second trading week coming to a close, gold prices are up 2%, while silver prices are relatively flat.

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