PRECIOUS-Gold gains as inflation fears overshadow firmer dollar, yields

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(iterates, adds comment and updates prices)

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* US retail sales data at 1330 GMT . is payable on

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* Fed may not be hawkish enough – analyst

Nov 16 (Businesshala) – Gold prices rose on Tuesday, with inflation concerns continuing to keep bullion’s appeal against higher price levels despite a stronger US dollar and higher bond yields.

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Spot gold was up 0.2% to $1,866.62 an ounce as of 0519 GMT. US gold futures were up 0.1% at $1,868.90.

Last Wednesday, gold prices have risen 1.8% since last month’s rise in US consumer prices, despite the dollar hitting a 16-month high and a rise in 10-year Treasury yields as well.

A stronger dollar makes gold more expensive for buyers holding other currencies, while a higher yield increases the opportunity cost of the metal.

“Inflation has become so high that the market reason is that the Fed will be more rigid, but still not enough, despite the high dollar fueling the appeal of inflation hedges like gold,” said DailyFX currency strategist Ilya Spivak. But the metal’s inefficiency after Wednesday’s break-out could suggest a “knee-jerk” reaction to increased inflation that does not have a permanent follow-up, Spivak said, adding that gold could be lower in the longer term.

Market participants are now eyeing US retail sales data due at 1330 GMT after reading surprisingly weak consumer sentiment last week.

A hike in rates impacts gold, as higher interest rates increase the opportunity cost of the non-yielding metal.

European Central Bank President Christine Lagarde said on Monday that tightening monetary policy to rein in inflation could affect the recovery of the euro area, emphasizing calls for tougher policy and market bets.

“Physical demand is also encouraging, with China importing 25 tonnes against less than 10 tonnes last year”, ANZ analysts said in a note, supporting gold prices.

Spot silver rose 0.4% to $25.13 an ounce. Platinum fell 0.1% to $1,085.61 and palladium fell 0.8% to $2,136.52. (Reporting by Nakul Iyer in Bengaluru; Editing by Sherry Jacob-Phillips and Rashmi Aich)


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