Gold Hovers Near Two-month High On Inflation Worries

Gold prices were subdued on Thursday, but held around a two-month high on concerns surrounding inflation and geopolitical tensions between Russia and Ukraine.

Spot gold dipped 0.1 percent to $1,838.79 per ounce, while U.S. gold futures were down 0.2 percent at $1,839.

Ahead of next week’s Federal Reserve policy meeting, U.S. President Joe Biden backed the central bank’s plans to scale back stimulus, saying taming inflation is a critical job for the Federal Reserve.

He also indicated his $2 trillion economic agenda will have to be broken up so that a scaled back version can pass Congress.

On Russia-Ukraine tension, Biden said the U.S. and its European allies are united on making sure Russia would face “severe economic consequences” if Putin attacks. He also suggested a full-scale invasion may not be in the Russian leader’s plans.

Inflation worries returned to the fore after data showed Germany’s producer prices grew at the strongest pace since the series began in 1949, driven by higher energy prices.

Producer prices grew 24.2 percent year-on-year in December, after rising 19.2 percent in November. This was the strongest year-on-year increase since the survey began in 1949 and also exceeded the economists’ forecast of 19.4 percent.

On a monthly basis, producer price inflation advanced to 5.0 percent from 0.8 percent in November. Economists had forecast prices to climb again by 0.8 percent.

Meanwhile, China stepped up its monetary easing efforts by cutting its mortgage reference rate for the first time in nearly two years.

The People’s Bank of China reduced the one-year loan prime rate by 10 basis points to 3.70 percent. The five-year LPR was slashed by 5 basis points to 4.6 percent.

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