Gold prices scaled a one-month high on Tuesday as recent signs of rising inflation underpinned demand, although the safe-haven metal gave up some early gains due to a stronger US dollar.
Spot gold dropped slightly by 0.2% to $1,807.21 an ounce by 2:40 p.m. ET, after hitting an intraday high of $1,819.85 earlier. US gold futures kept level at $1,807.40 per ounce.
[Click here for an interactive chart of gold prices]
Still, bullion is heading for its first annual loss in three years as central banks dial back pandemic-era stimulus to contain inflation.
Gold’s gains were also limited by the recent recovery in US equities. The S&P 500 notched its 69th record close of 2021 on Monday, suggesting investors remain relatively buoyant despite the omicron-driven travel disruptions and store closures.
“Gold has turned rangebound near $1,810 an ounce, reflecting the relative stability in the US dollar index and bond yields amid a lack of fresh triggers,” Madhavi Mehta of Kotak Securities told Bloomberg.
“Virus concerns have subsided, however rising cases and restrictions to limit the spread is a cause of concern,” the senior analyst added.
The lack of a rise in bond yields and building inflationary pressures are supportive factors for the gold market, said David Meger, director of metals trading at High Ridge Futures, in a Reuters report.
“The ongoing trend (for gold) remains sideways to higher in the near term, and we believe that this trend is coming from the continuation of the inflationary pressures that we see building in the market,” he added.
“The sideways trend will continue in the $1,750 to $1,820 range,” Victor Foo, chief executive officer of Singapore Precious Metals Exchange, predicted in a Bloomberg note. “Gold will face some resistance above $1,815 and moving forwards will continue to struggle at these levels unless the dollar moves sharply lower.”
While gold prices are expected to stay around the current levels early next year, rising US interest rates and falling inflation could hit prices, said UBS analyst Giovanni Staunovo, forecasting the metal to end 2022 around $1,650 per ounce.
(With files from Bloomberg and Reuters)