PRECIOUS-Gold firms on subdued risk appetite, growth concerns

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* Long-term inflation rate may push gold higher – Analyst

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* Gold investors largely ignore higher US Treasury yields (recast, adds comments, updates prices)

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Oct 12 (Businesshala) – Gold prices rose on Tuesday, fueled by rising inflation fears of turmoil in financial markets, though concerns of the US Federal Reserve limiting gains.

Spot gold rose 0.2% to $1,757.84 an ounce as of 0904 GMT, while US gold futures were up 0.1% at $1,757.70.

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Risk sentiment was dampened in broader financial markets, as fears of inflation triggered by the global energy crisis jeopardized the economic outlook and attracted some investors to safe-haven assets.

“There is a higher risk in the market and gold is benefiting from this, as well as concerns about inflation and the cooling of the global economy,” said Daniel Breesemann, analyst at Commerzbank.

If stagflation talks unfold swiftly, it should help gold clock $1,900 by the end of the year as interest rates remain relatively low, even as the Fed begins tapering, Brisemann said.

Gold has traditionally been seen as an inflation hedge. However, lower central bank incentives and higher interest rates boost government bond yields, which translates into a higher opportunity cost for holding no-interest gold.

Gold also avoided gains in the benchmark US Treasury yield, which had peaked since early June. The dollar index, on the other hand, remained largely stable.

The focus is also on the minutes of the Fed’s September 21-22 policy meeting and the Consumer Price Index scheduled for Wednesday.

Harshal Barot, a senior research advisor for South Asia at Metals Focus, said economic data would be closely watched for the health of the global economy and signs of a prolonged inflation slump could push gold to $1,800.

Spot silver rose 0.1% to $22.58 an ounce and platinum rose 0.6% to $1,014.23.

Palladium rose 0.1% to $2,113.46, hitting its highest level since September 10 at $2,182.67 on Monday. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Amy Caron Daniels)


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