Gold investments as a hedge against inflation shone again

U.S. gold futures, the most active contract in February, traded at $1,804.90 on Thursday, up $6.70 or 0.4% on the New York Comex exchange. The last time it closed above $1,800, the calendars showed November 22.

The rise of gold came as the Federal Reserve announced growing concerns about inflation in the US in a week that it set an accelerated path to end pandemic-era stimulus and raise interest rates for the first time since the Covid-19 outbreak that broke out in March 2020.

Gold rose 1.1% and hit a one-week high since early November.

Craig Erlam, analyst at online trading platform OANDA, said: "Gold reflects the news that central banks are tightening their monetary policy and are fighting inflation very well. It's perfectly normal for you to think that this would be a negative development for the yellow metal, and I think it will be in the long run. But it's also a development that was almost entirely expected and priced in."

Rate hike news is almost always bad for gold. This time, however, bullion traders seem to be focused on the US inflation story, allowing gold to play its traditional role as a hedge against it, but the Fed's strong action to remedy the situation could still be negative for the yellow metal.

The U.S. Consumer Price Index, or CPI, grew at the fastest pace since 1982, up 6.8% per year through November, the Department of Labor reported last week. It also announced that US producer prices recorded a record 9.6% year-on-year increase in November.