(iterates, adds comment and updates prices)
* Dollar hits one-year high
* US CPI posted biggest annual gain in 31 years last month
Nov 11 (Businesshala) – Gold prices fell on Thursday after rallying to a five-month high in the previous session, as investors reassured how the US Federal Reserve would respond to a jump in consumer prices last month.
Spot gold fell 0.1% to $1,847.23 an ounce, down by 0419 GMT. US gold futures rose 0.1% to $1,850.10.
The metal on Wednesday rose to its highest level since June 15 after US consumer prices recorded the biggest annual gain in 31 years last month, fueling interest in gold as an inflation hedge.
DailyFX currency strategist Ilya Spivak said, “The upshot could be a knee-jerk reaction to the data and gold could go lower as the market digests it, especially in the face of a more accelerated and prolonged Fed rate hike cycle.” amid concerns.
“If inflation expectations freeze, it could start to impact consumption, potentially leading to stagflation. But this is unlikely to benefit gold as monetary policy would be uncertain in such a scenario and investors are unlikely to be comfortable with that level of uncertainty.
Several Fed officials this week expressed growing concern over more prolonged inflation, even though they expect price hikes to eventually ease.
Easing monetary policies to spur economic growth during the pandemic have pushed gold prices to new highs in the past two years. But any hike in interest rates to pacify inflation should impact gold as it will increase the opportunity cost of the non-yielding metal.
Apart from this, the pressure on gold was a strong dollar, which reached its highest level in a year. A higher dollar increases the price of gold for buyers holding other currencies.
Spot silver rose 0.3% to $24.69 an ounce. Platinum was steady at $1,066.71 and Palladium rose 0.3% to $2,026.80. (Reporting by Nakul Iyer in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)