GOLD PRICES reached a five-month high on Wednesday after US inflation accelerated to its fastest annual pace in more than three decades, renewing investor interest in bullion.
US gold futures settled 1% higher at US$1,848.30 per ounce, according to Reuters, as markets assessed the implications of rising consumer prices for monetary policy.
The US Bureau of Labor Statistics reported that consumer prices increased 6.2% over the twelve months to October, the largest annual rise since November 1990.
Prices rose 0.9% during October on a seasonally adjusted basis, following a 0.4% increase in September.
The monthly rise was broad-based, with energy, housing, food and vehicles among the major contributors. Energy prices increased 4.8% during October, while petrol prices rose 6.1%.
Food prices increased 0.9% over the month. Excluding food and energy, the consumer price index rose 0.6% in October and 4.6% over the preceding twelve months.
The figures intensified debate about how quickly the Federal Reserve might need to tighten monetary policy.
Gold advanced despite a stronger US Dollar. Reuters reported that inflation-adjusted US Treasury yields fell to record lows, while nominal ten-year Treasury yields rose during the session.
The distinction matters for bullion: a rise in nominal yields does not necessarily mean investors are receiving a better return after accounting for expected inflation.
US share markets declined as investors considered the prospect of earlier policy tightening. The S&P 500 fell approximately 0.82%, while the Nasdaq Composite lost 1.66%.
The inflation release leaves gold investors weighing two competing influences. Persistent price pressures can increase interest in bullion, while the possibility of higher interest rates can raise the appeal of interest-bearing assets.
Disclaimer
This publication is for educational purposes only and does not constitute financial advice. It does not take into account any person’s investment objectives, financial situation or needs. Before making an investment decision, consider whether the information is appropriate to your circumstances and seek advice from a licensed financial adviser where necessary. Past performance is not a reliable indicator of future performance.