WSJ: UPDATE: Spot Gold Hits 4-week High On UK Inflation Rate Rise
LONDON (Dow Jones)--Spot gold Tuesday spiked to a four-week high on news U.K. consumer prices rose at double the Bank of England's target rate in January, said market players.
After treading water around $1,366 a troy ounce before the U.K. data came out, the yellow metal jumped $6 in a minute shortly after the announcement before steadily rising to $1,373/oz, its highest price since Jan. 19.
The spike is a reflection of widespread concern in the investment community over rising inflation rates on a global scale, said analysts.
"The news comes amid a series of warnings by various financial ministers over the threat of inflation on the economic recovery, and is sending investors to gold as a traditional inflation hedge," said FastMarkets.com analyst James Moore.
But while the sudden to rush to bullion isn't surprising on the basis of rising inflation rates, a potential increase in interest rates in reaction to the news could be more problematic for gold, which traditionally flourishes when rates are low.
"It is interesting to see gold rise, despite the monetary tightening implications of the data," noted Moore.
At 1034 GMT, spot gold traded up 0.8% on the day at $1,372.28/oz.
