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Metals: Gold Inches Higher Ahead of Inflation Data

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02/13/2018 | 08:45 pm

By Amrith Ramkumar

Gold prices inched higher Tuesday, with many investors looking ahead to inflation data later in the week that could provide clues about the path forward for interest rates.

Front-month gold for February delivery rose 0.3% to $1,328.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen 2.5% since hitting their highest level since August 2016 late last month, with some analysts pinning the declines on concerns about higher interest rates.

Gold struggles to compete with yield-bearing assets like Treasurys as borrowing costs rise. The yield on the 10-year U.S. Treasury note has recently hit a four-year high, with some analysts attributing the gains to investors' rising inflation expectations. Some think that could give the Federal Reserve a freer hand to raise interest rates more quickly than expected.

Many analysts will be closely monitoring consumer and producer price data, scheduled to be released Wednesday and Thursday, for the latest signals on inflation. Some investors have also said markets are still looking for a new equilibrium after a recent surge in volatility in the stock market rattled investors.

"We'll have to wait and see if it's an indication of more to come in the future," said Joe Foster, a fund manager at VanEck Associates Corp. "What's going on with Treasurys and interest rates right now suggests the markets are entering a new regime," he said.

Some investors have said they are surprised gold hasn't fared better given that the precious metal is a haven asset that many favor when markets turn rocky. That could indicate many investors aren't broadly worried about the economy, some analysts have said.

A weaker dollar was supporting gold by making it and other dollar-denominated commodities cheaper for overseas buyers Tuesday. The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell 0.4%.

Among base metals, front-month copper for February delivery surged 2.5% to $3.1545 a pound, continuing a rebound following last week's declines. The industrial metal has fallen 4% off four-year highs hit in late December, but some analysts expect supply disruptions from mining labor contract renegotiations and strong demand to buoy prices moving forward.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

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