Gold, silver jump as dollar dips ahead of U.S. CPI data

Gold jumped 1% and silver rallied over 6% on Monday bolstered by a weaker dollar, while investors awaited key inflation data for cues on the pace of interest rate hikes by the U.S. central bank.

Spot gold last rose 0.49% to $1,724.386 per ounce. U.S. gold futures also gained 0.42% to $1,735.80

European Central Bank officials have signaled further rate hikes to rein in inflation, which has supported the euro and pressured the U.S. dollar and is in part responsible for some strength in the gold market, said David Meger, director of metals trading at High Ridge Futures.

The dollar index retreated, making gold more attractive for overseas buyers. Investors braced for Tuesday’s U.S. Consumer Price Index reading that is likely to show August prices rose at an 8.1% pace over the year, versus an 8.5% print for July.

“We may be seeing traders position for a favorable U.S. inflation report tomorrow which could provide a bigger lift again if we see further softening,” Craig Erlam, senior market analyst at OANDA.

Gold is traditionally considered an inflation hedge, but rate hikes translate into a higher opportunity cost for holding bullion, which pays no interest.

Gold’s moves seemed to be overshadowed by silver, which usually follows gold but can be additionally influenced by economic cues given its industrial uses. Spot silver jumped more than 5% to its highest since Aug. 17 at about $20 an ounce.

High Ridge’s Meger termed it a “dramatic short covering rally.” The metal may also be taking cues from an overall risk-on rally, Fawad Razaqzada, market analyst at City Index, said in a note.

Palladium advanced 4.23% to $2,264.9153 per ounce, after hitting its highest since Aug. 12 at $2,274.33. Platinum bounced 2.73% to $905.0533.