Gold edged higher as concerns about inflation increased their appeal

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Gold edged higher on Tuesday, supported by rising inflation concerns, but gains were limited by a stronger dollar and expectations the Federal Reserve will announce a tapering of its bond buying program next month.
Spot gold was up 0.3 percent at $1,758.25 an ounce by 353 GMT, while U.S. gold futures were up 0.1 percent at $1,758.20.
“Gold is relatively resilient and all the arrows point to stagflation and growth (debate),” said Stephen Innes, managing partner at SPI Asset Management in New York.
However, he said investors were reluctant to chase the rally ahead of the Release of minutes from the Fed’s September meeting.
The dollar hovered near a one-year high hit last month, limiting gold’s gains on surging energy prices and expectations that the Federal Reserve will soon begin normalizing policy.

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Benchmark U.S. 10-year Treasury yields hit their highest since early June.
Gold is often seen as an inflation hedge, but central bank stimulus cuts and interest rate hikes tend to push up government bond yields, raising the opportunity cost of owning bullion, which yields no interest.
“Against the backdrop of generally low interest rates, the risks of slower growth and higher inflation remain, and the strategic allocation to gold will continue,” analysts at ANZ Research said in a note. They added that they expected gold to rise to $1,850 before falling back next year.
Meanwhile, fears of inflation from the global energy crisis and debt problems at China Evergrande weighed on Asian equity markets.
Market participants are now awaiting the minutes of the Fed’s Sept. 21-22 policy meeting and the consumer price index, which will be released later this week.

 

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