Gold hovers near 4-1/2-month high on tepid dollar, inflation jitters

Gold prices climbed on Monday to hover near a 4-1/2-month high, supported by a weaker US dollar and growing inflationary pressure, while a slide in cryptocurrencies further lifted the safe-haven metal's appeal.

Spot gold was up 0.2% at $1,883.21 per ounce by 0301 GMT. Last week, gold prices hit their highest level since Jan. 8 at $1,889.75.

US gold futures rose 0.4% to $1,884.30 per ounce.

"The US dollar index remain relatively weak and the manufacturing and service PMI's from the US and Europe actually raised the prospect of inflation in months to come," Margaret Yang, a strategist at DailyFX said.

"Recent slide in cryptocurrencies also boosted the appeal of gold as an alternative investment asset. Gold's upward momentum is very strong and it is likely to challenge a key psychological level at $1,900 in the days to come."

The dollar stood near its lowest levels in three months against the resurgent euro and other European currencies, making gold cheaper for other currency holders.

Rising US inflationary risks have spooked markets after data showed rise in consumer prices and pick up in factory activity, lifting gold's appeal as an inflation hedge.

Indicative of sentiment, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose 0.6% to 1042.92 tonnes on Friday. Speculators raised their net long positions in COMEX gold in the week ended May 18.

Further contributing to gold's move, bitcoin fell 13% on Sunday, sending it down ~50% from the year's high after Beijing stepped up its efforts to crack down on bitcoin mining and trading.

The White House said on Friday it had pared down its infrastructure bill to $1.7 trillion from $2.25 trillion, but Republicans dismissed the changes as insufficient for a deal.

Elsewhere, palladium jumped 1% to $2,810.32 per ounce, silver gained 0.4% to $27.64 and platinum climbed 0.6% to $1,173.03.