Gold prices pull back from February high as inflation fears percolate

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Gold prices were seeing lackluster trade Tuesday, edging lower but mostly holding near the highest levels since February, amid selling of assets considered risky, including global stocks and oil.

June gold
GCM21,
-0.45%
 was off $9.80 cents, or less than 0.5%, at $1,827.80 an ounce, after the precious metal rose 0.3% Monday, adding to a climb to the highest finish since Feb. 10, FactSet data show.

Some strategists are pointing to growing concerns that rising inflation in the U.S. and other countries could prompt the Federal Reserve to remove its easy-money policies sooner than expected in the aftermath of the COVID pandemic.

Data out of China on Tuesday showed that prices at factories in China rose at the fastest pace in 3½ years in April. China’s producer-price index, rose 6.8% last month from the period a year ago, the National Bureau of Statistics said.

Gold is viewed as a hedge against inflation but if concerns about pricing pressures causes the Fed to raise interest rates that could undercut appetite for precious metals which don’t offer a coupon and compete against U.S. Treasurys.

Still, the selling in global stocks, with the Dow Jones Industrial Average
DJIA,
-0.10%
and the S&P 500
SPX,
-1.04%
indicated lower on Tuesday, were helping to cap declines in gold, strategists said.

“The yellow metal remains supported by the risk-off mood in the market and the slightly softer tone surrounding the US dollar,” wrote Sophie Griffiths, market analyst at Oanda in a Tuesday note.

“Inflation concerns are being played out in the equities market,” the analyst wrote.

Trade in gold also was coming as oil prices
CL.1,
-1.14%
were under pressure as investors weighed the impact of the Colonial Pipeline disruption, while 10-year Treasury yields
TMUBMUSD10Y,
1.612%
were holding steady above 1.60% and the U.S. dollar, as measured by the ICE U.S. Dollar Index
DXY,
-0.25%,
was around the lowest level in 2 1/2 months.

 



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