Gold futures posted their biggest single-day gain in nearly three weeks on Monday, after previously posting their biggest weekly gain since mid-November.
"Inflation is starting to crowd out the US dollar and Treasury yields as key drivers, which is why we're seeing such a strong performance," said Metals Daily's Ross Norman.
He notes that gold is also supported by the sentiment of those who believe that the Fed is starting to lag far behind the trend, and the likelihood of a political mistake by the central bank has increased significantly.
Gold quotes have two key target levels, says Norman. The first - 1815 dollars - was overcome today. The next one is $1,835. “After that, prices can rise much higher,” he said. “They just need to accelerate at the exit, which they have not been able to do for more than a year.”
April gold futures rose $14, or 0.8%, to $1,821.80 an ounce on Monday. According to FactSet data, this is the biggest percentage increase since January 19 and the highest closing price for the most actively traded contracts since January 26. Last week, quotations of such contracts rose by 1.2%, which is the largest increase since the week ended November 12, when gold rose by 2.9%.
Gold prices continue to rise despite more positive than expected data on the US labor market.
According to a report released Friday, U.S. non-farm payrolls rose by 467,000 in January, while economists polled by the Wall Street Journal had expected an increase of only 150,000. spread of the micro-strain of coronavirus during the reporting period.
More positive data may support an accelerated rate hike by the US Federal Reserve. The market expects key interest rates, currently 0%-0.25%, to be raised four times this year.
Gold's performance over the medium term will be determined by how quickly the Fed "decides to move to a more aggressive strategy, which central bankers have been quite open about last week," said Rupert Rowling, market analyst at Kinesis Money.
An increase in interest rates is likely to support the dollar and put pressure on gold quotes.
The ICE dollar index rose to 95.51 on Monday, while the yield on 10-year US Treasury bonds fell to 1.91%. A stronger dollar could dampen demand for US-denominated gold from holders of other currencies while rising Treasury yields could increase the opportunity cost of owning the precious metal.
Amid concerns about inflationary pressures, the focus will be on the Consumer Price Index (CPI), due out on Thursday.
Meanwhile, March silver futures rose 60 cents, or 2.7%, to $23.076 an ounce. Silver gained 0.8% last week.
March copper fell 0.6% to $4.463 a pound. April platinum fell 0.4% to $1.020 an ounce, while March palladium fell 1.3% to $2,260.10 an ounce.