Gold Stabilises After Rising 1% Following U.S. Inflation Data

Gold steadied on Thursday, after U.S. inflation data lifted prices over 1% in the previous session, as traders were cautious about the Federal Reserve's policy stance amid fears of a build-up in underlying inflation pressures.

Spot gold was nearly flat at $1,852.36 per ounce, as of 0350 GMT. U.S. gold futures were little changed at $1,853.30

U.S. consumer price growth slowed sharply in April as gasoline eased off record highs, suggesting inflation has probably peaked, although it is likely to stay hot for a while and keep the Fed's foot on the brakes.

Bullion prices hit a three-month low early on Wednesday before rising as much as 1.1% after the consumer price inflation data.

The inflation reading comes on the heels of the Fed raising its benchmark overnight interest rate by an aggressive half a percentage point last week -- the biggest hike in 22 years -- as it moves to unwind ultra-easy pandemic-era monetary policy.

Bullion yields no interest, and is hence sensitive to rising U.S. short-term interest rates and bond yields. Lower benchmark 10-year Treasury yields on Thursday, however, decreased the opportunity cost of holding gold.

With inflation risks still there, however, investors will now want gold as a safe-haven asset after the recent sell-off, said Brian Lan, managing director at dealer GoldSilver Central, adding that investors also know that once lockdowns in China are lifted, there may be more support for precious metals.

Meanwhile, the U.S. dollar steadied near its highest levels in 20 years, continuing to restrain gains in greenback-priced bullion.

"With inflation expectations rising and evidence of money flowing into gold, we're left wondering if an important swing low formed yesterday (Wednesday) around above $1,830," City Index's senior market analyst Matt Simpson said in a note.

Spot silver was down 0.4% at $21.47 per ounce, while platinum dipped 0.1% to $991.37, and palladium fell 0.2% to $2,032.07.