Gold Holds Near Three-Month High as Inflation Expectations Rise

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Gold held near a three-month high as investors weighed rising inflation expectations and comments from Federal Reserve officials for clues on monetary policy going forward.

Bond market expectations for the pace of inflation over the coming half decade surged on Monday to the highest since 2006. The jump in the five-year breakeven rate comes amid a run-up in commodities and adds to a longer-term uptick in inflation bets that’s been fueled by improving prospects for growth and pandemic-related stimulus measures.

“Inflation expectations are already elevated and will move lower,” said Georgette Boele, a senior precious metals strategist at ABN Amro Bank NV. Gold’s “rally is running out of steam just below the 200-day moving average at $1,850 an ounce.”

Bullion posted the biggest weekly gain since November last week after a report showed a surprise slowdown in U.S. job growth, supporting the case for continued economic stimulus and low interest rates. Traders will be watching for the U.S. CPI report due Wednesday, which is forecast to show prices continued to increase in April.

Spot gold added 0.2% to $1,839.75 an ounce by 12:52 p.m. in London, after reaching $1,845.51 on Monday, the highest since Feb. 11. Silver and palladium gained, while platinum declined. The Bloomberg Dollar Spot Index edged lower.

The U.S. labor market should continue to make a “strong” recovery despite its weaker-than-expected performance last month, said Federal Reserve Bank of Dallas President Robert Kaplan, because consumer demand remains robust.

His confidence on the outlook for the job market was echoed by…

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