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Markets

Gold jumps as stocks slip on inflation fears; Fed minutes eyed

  • Spot gold was 0.9pc higher at $1,884.46 by 12:17 p.m. EDT (1617 GMT), having earlier hit its highest since Jan. 8 at $1,889.75. U.S. gold futures gained 0.9pc to $1,885.50.
19 May, 2021

Gold jumped over 1pc to a more than four-month high on Wednesday as weaker equity markets and inflation concerns boosted bullion's safe-haven appeal, with focus turning to minutes from the U.S. Federal Reserve's latest policy meeting.

Spot gold was 0.9pc higher at $1,884.46 by 12:17 p.m. EDT (1617 GMT), having earlier hit its highest since Jan. 8 at $1,889.75. U.S. gold futures gained 0.9pc to $1,885.50.

"There's a lot of turmoil in the global equity markets, so there's flight to safety. Gold has bounced pretty good off its lows... there's an opportunity here to move back above $1,900 shortly," said Bob Haberkorn, senior market strategist at RJO Futures.

Global stocks slipped as a threat of unwanted inflation had investors shy away from riskier assets.

Minutes from the Fed's April 27-28 policy meeting are due at 1800 GMT.

"The markets are also pricing in the Fed to be dovish," Haberkorn said, adding the central bank will not change its stance on inflation at the moment.

Gold has risen by more than $200, or over 12pc, since falling to a nine-month trough in early March, with gains driven by a pullback in the dollar and a rise in inflation expectations, as bullion is considered a hedge against inflation.

"Supportive institutional flows have helped the yellow metal break out from its downtrend... most recently highlighted by rising exchange traded flows (ETF) flows alongside rising money manager positioning," TD Securities said in a note.

"With investors sounding the alarm over inflation, institutional interest in the precious metals complex is likely to continue rising following months of outflows."

Gold also seemed to benefit from a tumble in bitcoin, as selling in digital coins intensified after China's ban, analysts said.

Silver eased 0.8pc to $27.97 per ounce. Palladium fell 1pc to $2,873.29, while platinum lost 1.8pc to $1,196.10.

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