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Gold gains as dollar, yields slip; focus on U.S. inflation data

·2-min read
An ingot of 99.99 percent pure gold is cast at the Krastsvetmet non-ferrous metals plant in Krasnoyarsk

By Ashitha Shivaprasad

(Reuters) - Gold prices rose on Monday following a pullback in the dollar and U.S. Treasury yields, while investor focus shifted to U.S. inflation data for clues on the Federal Reserve's rate hike plan.

Spot gold rose 0.8% to $1,787.39 per ounce by 2:25 p.m. ET (1825 GMT). U.S. gold futures also settled up 0.8% at %1,805.2.

The dollar index fell 0.2%, making gold more appealing to other currency holders. U.S. Treasury yields also slipped. [USD/] [US/]

Gold is considered a safe investment amid political tensions and recession worries, but high interest rates tend to dim the appeal for bullion, which pays no interest.

"The market seems to have priced in the shock from the jobs number ... however, gold will have a tough time if the Fed is seeing tightening much further," said Edward Moya, senior analyst with OANDA.

"Foreign investors are going to be looking for alternative investments and gold is an option with the ongoing situation in Taiwan and Ukraine."

Gold fell on Friday after robust U.S. job growth reinforced expectations that the Fed will continue to raise rates in the next few meetings to slow inflation. [nL4N2ZH397

With gold's gains capped by the potential of more aggressive hikes, the strength of technical support around $1,700 will be tested when the Fed's next decision is announced, Kinesis Money analyst Rupert Rowling said in a note.

The U.S. consumer price index report due on Wednesday could offer clues on the Fed's next move.

Spot silver rose 3.7% to $20.60 per ounce, while platinum was up 0.5% to $937.0.

Palladium jumped 5.6% to $2,245.68.

China's palladium autocatalyst demand was likely to shrink slightly this year, mainly due to lockdowns in Shanghai in the second quarter and the growing market share of "new energy" vehicles, Heraeus Precious Metals said in a note.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Shounak Dasgupta and Krishna Chandra Eluri)