Gold settles higher, dollar hits 13-year peak

Gold futures titled higher in American trade off August 3 lows, on track for the first weekly profit in five, even as the dollar index rallied to July 2017 highs following upbeat inflation data from the US today. 

As of 01:52 GMT,  gold futures due in December rose 0.18% to $1,222.10 an ounce off week lows, while the dollar index surged 0.73% to 96.20, marking 13-month highs. 

Earlier US data showed consumer prices rose 0.2% m/m in July as expected, accelerating from 0.1% in June, while core prices, excluding food and energy, rose 0.2% as expected with no change from June. 

On a yearly basis, consumer prices rose 2.9% as expected with no change as well, while core prices accelerated to 2.4% from 2.3%. 

The dollar index has strengthened considerably against major currencies, heading for the third weekly profit in a row on prospects of two more Federal Reserve rate hikes this year. 

Dollar's rivals have taken a beating, mainly euro and sterling on prospects of an unorganized Brexit, while the yuan has slumped as well due to the US-China trade war. 

World Gold Council  

The World Gold Council recently forecast an increase of demand on the yellow metal in the second half of 2018 as inflation rises and the global trade war takes firmer shape and hurts currencies. 

Despite similar concerns in the first half of the year, gold prices were stymied by dollar's strength as the Federal Reserve tightens monetary policy on the back of strong US data.  

Recently, the World Gold Council reported a 7% drop in global demand in the first quarter of 2018 to 973.5 tonnes, the lowest since the first quarter of 2008, as investments fell 27% on the precious metal to 287 tonnes from 383 tonnes in the first quarter of 2017. 

Central banks' gold demand rose 42% to 116.5 tonnes, especially from Russia, while jewelry demand steadied at 487.7 tonnes, as mine supplies grew 1% y/y to 770 thousand tonnes. 

Gold holdings at SPDR Gold Trust, the world's largest gold-backed investment fund, steadied at 786.08 tonnes on Wednesday, the lowest since February, 2016, after gold prices registered losses in July for the fourth month in a row.