Gold rises as inflation fears resurface

The price of gold hit a new three-month high on Monday after worries about US inflation increased and cases of Covid-19 increased in parts of Asia.

Gold rose 0.7% to $1,854 an ounce - the highest price since 2 February. The metal, which investors buy in times of crisis or when they are worried about inflation, soared to more than $2,000 an ounce in summer 2020 before retreating when Covid-19 vaccines were discovered.

Consumer prices rose 4.2% on an annual basis in April, the fastest pace since 2008, government figures showed on 12 May. The reading added to concerns that inflation could get out of hand as economies rebound from Covid-19 lockdowns and the Biden administration spends on infrastructure and other projects.

Officials sought to play down these concerns, treating stronger inflation as a temporary trend. The Bank of England is taking the same approach though the BoE's departing chief economist has warned inflation could reach 1970s levels.

Neil Wilson, chief market analyst at Markets.com, said: "Last week was all about inflation. Various Fed speakers sought to calm speculation as breakevens broke higher. The subsequent drop in nominal rates against persistently high inflation expectations has seen real yields plunge with 10yr TIPS back to –0.88%, whilst 30yr TIPS have flipped negative again. This has helped gold rally to fresh 3-month highs above $1,850."

Investors were also concerned about the persistence of Covid-19 in parts of Asia. India has been engulfed by a second wave of the disease and Taiwan and Singapore tightened social distancing measures in response to rising cases.

Gold was price at $1,849.3800 at 12:17 BST.