PRECIOUS-Gold near 5-month high as inflation fears deepen

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(iterates, adds comment and updates prices)

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* US CPI posted biggest annual gain in 31 years last month

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* Inflation figures deal a punch for team ‘transient’ – analyst

Nov 11 (Businesshala) – Gold prices rose to a five-month high in the previous session on Thursday, after a warm inflation reading from the United States pushed investors to the safety of the precious metal.

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Spot gold rose 0.6% to $1,860.59 an ounce as of 0909 GMT. US gold futures rose 0.8% to $1,863.30.

“Spot gold remains high after a gut punch to ‘Team Transitary’ following the latest US CPI release,” said Han Tan, chief market analyst at Axinity, adding that gold prices will be well supported as long as inflation continues. Fear will prevail over emotions.

Gold, seen as a hedge against inflation, rose 2% on Wednesday to its highest level since mid-June, when data showed US consumer prices rose at the fastest pace in 31 years in October .

“(But) persistent inflation could turn into a bullish cycle of US rate hikes, testing the Federal Reserve’s patience on policy stance,” Tan said.

Lower incentives and higher interest rates boost government bond yields, increasing the opportunity cost of gold, which pays no interest.

The metal strengthened despite the dollar hitting a 15-month high, making gold more expensive for holders of other currencies.

Recent gains in bullion have been supported by a sluggish tone taken by major central banks last week, with the Federal Reserve reiterating its view that inflation was “temporary” and likely would not require a rapid increase in rates.

However, this week several Fed officials expressed growing concern over more prolonged inflation.

Among other metals, spot silver rose 1.2% to $24.91 an ounce. Platinum rose 1.4% to $1,082.00 an ounce, and palladium rose 1.5% to $2,050.23. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Ramakrishnan M)

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