PRECIOUS-Gold hits over 3-month high on lower U.S. bond yields

* U.S. Fed minutes due on Wed in focus

* Silver hits one-week high

* Spot gold may rise to $1,876/oz – Reuters technical analyst (Recasts, adds comment, updates prices)

May 17 (Reuters) – Gold prices hit a 3-1/2 month high on Monday as a dip in U.S. Treasury yields and persistent inflation worries in the bullion market burnished the appeal of the non-yielding metal.

Spot gold was up 0.5% at $1,850 per ounce by 0930 GMT, after hitting its highest since Feb. 2 earlier in the session. U.S. gold futures jumped 0.7% to $1,851.10.

“Higher than expected (U.S.) consumer price inflation and weaker retail sales was really the potent combination for gold,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“Higher inflation has been the key source of inspiration for renewed demand that we have seen in gold, especially during the last couple of weeks.”

Key U.S. economic readings last week showed April U.S. retail sales unexpectedly stalled and a bigger-than-expected rise in consumer prices.

The Fed sought to ease market concerns about rising inflation after the data, keeping a lid on U.S. Treasury yields.

Benchmark U.S. 10-year Treasury yields slipped to their lowest in nearly a week, reducing the opportunity cost of holding non-interest bearing gold.

Investors now await minutes of the U.S. Federal Reserve’s last meeting due on Wednesday for more cues on the central bank’s monetary policy and any comments on inflation.

Gold is seen as a hedge against rising inflation.

Speculators had raised net long positions in gold in the week to May 11, data from U.S. Commodity Futures Trading Commission showed on Friday.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.4% to 1,028.36 tonnes on Friday.

Spot gold may rise to $1,876 per ounce, as it has broken a resistance at $1,847, according to Reuters technical analyst Wang Tao.

Elsewhere, silver was up 0.8% at $27.62 per ounce, after hitting a one-week high earlier in the day. Platinum gained 0.4% to $1,229.80 and palladium edged 0.4% higher to $2,903.62.

Source: Read Full Article