Gold Holds Biggest Gain Since March on Persistent High Inflation

As investors considered concerns about stubbornly high inflation and the imminent decrease in stimulus, gold held steady following its largest gain in seven months.

The consumer price index in the United States increased more than expected in September, resuming a higher rate of growth and highlighting the economy's continued inflationary pressures. Following the announcement of the data on Wednesday, the yield on 10-year Treasuries dropped after an initial rise, increasing demand for non-interest-bearing bullion. China's factory-gate prices rose at their highest rate in nearly 26 years last month, adding to global inflation concerns, according to data released on Thursday.

Meanwhile, minutes from last month's Federal Reserve meeting revealed that members generally agreed that reducing asset purchases should begin in mid-November or mid-December, owing to rising inflation concerns. One of the major pillars in bullion's climb to a record last year was the pandemic-era stimulus measures.

"If high inflation remains, gold may really start attracting a strong bid," said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. "This is a huge change from earlier in the year, when taper worries overshadowed inflation fears," he said. "Gold has historically performed well in inflationary circumstances, therefore the market should become positive if inflation continues to outperform."

After rising 1.9 percent on Wednesday, the highest since March 9, spot gold dropped 0.2 percent to $1,789.06 an ounce at 12:17 p.m. in Singapore. After falling 0.5 percent in the previous session, the Bloomberg Dollar Spot Index was little altered. Silver, platinum, and palladium all fell in price.