Gold, silver jump as dollar dips ahead of US CPI data

Sept 12 (Reuters) – Gold jumped about 1% and silver rallied over 5% on Monday, bolstered by a weaker dollar, while investors awaited key inflation data for cues on the pace of interest rate hikes by the US central bank.

Spot gold rose 0.7% to USD 1,728.57 per ounce by 1:53 p.m. EST (1753 GMT), after rising to its highest since Aug. 30 at USD 1,734.99.

US gold futures settled 7% higher at USD 1,740.6.

European Central Bank officials have signalled further rate hikes to rein in inflation, which has supported the euro and pressured the 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 US 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 favourable US inflation report tomorrow which could provide a bigger lift again if we see further softening,” said 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 USD 19.80 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 3.7% to USD 2,253.55 per ounce after hitting its highest since Aug. 12.

Platinum rose 2.5% to USD 903.16.

(Reporting by Arundhati Sarkar in Bengaluru, additional reporting by Arpan Varghese, Rahul Paswan; Editing by Krishna Chandra Eluri, Vinay Dwivedi and Maju Samuel)