By Barani Krishnan

Investing.com – Gold settled on Thursday at its highest level in five weeks, boosted by U.S. inflation risk after latest data showed the world’s largest economy facing its worst price pressures in four decades.

U.S. gold futures’ most active contract, , settled up $9.50, or 0.5%, at $1,811.70 an ounce on New York‘s Comex. This was the closest spot contract to Comex gold since Nov. 19.

“Gold should have a strong 2022 as the risks to the outlook remain elevated,” Ed Moya, analyst at online trading platform OANDA, said, after the Federal Reserve’s closely watched inflation barometer — the Personal Consumption Expenditures Index — grew by 5.7% in the year to November.

According to historical data, it was the biggest annual increase in the so-called PCE for 39 years. Before this data had shown that the U.S. CPI, or CPI rose 6.8% in November. This was its fastest growth since 1982. The record-breaking 9.6% increase in U.S. Producer Prices was also recorded in November.

Gold has traditionally been touted as a hedge against inflation, although that argument was weakened earlier this year as the yellow metal’s prices steadily fell in the face of ramping price pressures in an U.S. economy rebounding aggressively from the coronavirus pandemic.

For the week, gold gained 0.4%. Thursday is the last trading day for U.S. markets, which will be closed on Friday in observation of Saturday’s Christmas holiday.

Gold’s has rallied lately despite the Federal Reserve announcing an expedited timetable for ending its pandemic-era stimulus and raising interest rates for the first time since the Covid-19 outbreak of March 2020. According to the Fed, it may have three rate increases in 2022.

News about rate rises almost always have a negative impact on gold. Bullion traders seem to have their eyes on U.S. inflation, so gold can continue to serve its original role of being a hedge. But, the Fed’s strong action could be a negative for yellow metal.