Gold trades above $ 1,800 milestone on inflation concerns

Gold prices surpassed the $ 1,800 milestone again on Monday, backed by lingering inflation concerns, as investors await the next Federal Reserve meeting to learn its monetary policy outlook.

At 1203 GMT, spot gold was up 0.5% to $ 1,801.22 an ounce, while US gold futures were up 0.4% to $ 1,802.50.

Although there is a perception that inflation will be transitory, there is a persistent element of pressure, said Michael Hewson, chief market analyst at CMC Markets UK.

Fed Chairman Jerome Powell reiterated his view on Friday that high inflation is likely to decline next year, pushing gold prices down from their September highs.

He also stated that the Fed should begin the process of reducing its support for the economy by cutting its asset purchases, but not yet touching interest rates.

Markets are pricing in high inflation and many players believe the current high levels will not be temporary, Commerzbank analyst Daniel Briesemann said in a note. “Gold should benefit from this for its role as a store of value“, he pointed.

Bullion is often viewed as a hedge against inflation, although reduced stimulus and rate hikes boost bond yields, which translates into a higher opportunity cost of owning the non-interest bearing gold metal.

In other precious metals, spot silver was up 0.4% to $ 24.40 an ounce, platinum was up 0.1% to $ 1,041.06 and palladium was up 0.9% to $ 2,039.87 .