Gold, Silver Reach Three-Month Highs as Inflation Fears Grow
A stack of one kilogram gold bullion bars sit inside a vault in Germany. (Photographer: Michaela Handrek-Rehle/Bloomberg)

Gold, Silver Reach Three-Month Highs as Inflation Fears Grow

Gold and silver reached the highest prices in more than three months, extending a recovery from a slump as growing inflation concerns and assurances on monetary policy pull investors back to the metals.

Prices rose as U.S. stocks declined for a second day, with investors weighing the rush to reopen the economy against inflationary pressure from a rise in commodity prices. The precious metals, which are often used as a hedge against rising consumer prices, are also benefiting from a weaker the dollar and wavering Treasury yields.

Gold, which was dogged by higher bond rates at the start of the year, has staged a second-quarter turnaround. The recovery has been driven by repeated assurances from Federal Reserve officials that they aren’t considering raising rates or scaling back bond buying anytime soon. Holdings in exchange-traded funds backed by bullion rose for a seventh straight session.

“It seems inflation fears are finally translating into higher precious metals prices,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “ETF investors are starting to swing into net buyers again.”

Gold, Silver Reach Three-Month Highs as Inflation Fears Grow

Spot gold gained 0.1% to $1,869.44 an ounce on Tuesday, after advancing to $1,875.10, the highest since Jan. 29. Silver for immediate delivery rose as much as 2.1% to $28.7533 an ounce, the highest since early February, when the metal was trading near an eight-year peak. Palladium rose, while platinum slipped.

Investors will look to the minutes from the Federal Reserve’s April meeting due Wednesday for any sign that policy makers may reduce stimulus earlier than expected. Fed Vice Chair Richard Clarida said Monday the economy had not yet reached the threshold to warrant scaling back massive bond purchases, while Dallas Fed President Robert Kaplan said he expects price pressures to ease in 2022.

While Morgan Stanley expects the first warning of bond tapering to come in September -- putting pressure back on gold -- the bank said bullion has the potential to stay above $1,700 an ounce through the second half of the year.

©2021 Bloomberg L.P.

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