Gold holds steady as investors await U.S. inflation data

Gold holds steady as investors await U.S. inflation data

Gold jumped 1 per cent on Wednesday, rebounding from losses made in the wake of stronger than expected U.S. inflation data, as the dollar surrendered gains and stock markets swung higher.

Spot gold was up 0.5 per cent at US$1,323.16 an ounce by 2.26pm EST (1926 GMT).

The dollar index, which measures the greenback against a basket of currencies, eased 0.2 per cent to 90.291 after gaining 1.4 per cent last week. S. gold futures for April delivery were up $2.70 an ounce at $1,333.10.

Stock markets, which scaled record peaks in recent months, slid sharply last week, dragging gold prices as investors sought refuge in the USA dollar.

World shares rallied on Monday in a broad advance that brushed off fresh rises in global bond yields that have been driven by inflation fears as investors shifted asset allocations after the worst week in global markets in the past two years.

A weak greenback makes dollar-denominated gold cheaper for holders of other currencies, potentially boosting demand.

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The U.S. Department of Labor released in the morning the Consumer Price Index (CPI) for January, which was up 0.5 percent, marking the biggest increase in five months.

"After last week's sell off in risk assets, we expect gold to be well supported, especially if volatility in financial markets persists", Eliseo said.

"The uptick in prices today is not so much safe-haven buying, but more so potential short covering behaviour by market watchers", said OCBC analyst Barnabas Gan.

Hedge funds and money managers slashed their net long position in COMEX gold for the first time in eight weeks in the week to February 6, and cut it in silver, US Commodity Futures Trading Commission data showed on Friday.

Among other precious metals, silver was up 1.5pc at $16.79 an ounce, palladium gained 1.5pc to $999.60 and platinum was up 1.7pc at $993. Platinum rose 2 percent at $993.24, earlier hitting $998.80, its highest in almost three weeks. Prices had touched their lowest since January 4 at $1,306.81 last week. According to the EI statistics office Eurostat, Euro Zone industrial production rose 0.4 percent month-on-month for a 5.2 percent year-on-year gain.

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