Gold prices inched higher on Wednesday on softer U.S. dollar and rising inflationary pressure. The greenback plunged near a three-month trough and made the yellow metal less expensive for investors using rival currencies. U.S. consumer prices in April rose at the fastest rate in more than ten years and raised inflation expectations.

Bullion prices plunged to a nine-month low in March but have since climbed by more than 11% or $190 per ounce. Most of the gains were driven by inflation expectations and a decline in the dollar index.

Spot gold is currently trading at $1,867.70 per ounce as of 0801 GMT.

DailyFx currency strategist Ilya Spivak noted the bullion’s strong rally since Monday. It happened in an environment where there is an expected increase in the inflation rate and the central bank likely to maintain its loose monetary policy. In this environment, Spivak predicted that commodity prices would remain stronger and the dollar weaker.

The Federal Reserve has vowed to maintain low-interest rates until the economy has fully recovered from the pandemic. Central bank officials also repeatedly maintained that any increase in the inflation rate would be temporary and short-lived.

Meanwhile, the U.S. Commerce Department reported that house construction dropped by 9.5% in April. Economists attributed the unexpected decline to delayed projects and rising prices of construction materials such as lumber.

In world news, world powers have called for an Israeli-Palestine ceasefire. But yesterday, Israel continued its airstrike in Gaza, while Palestinian militants resumed their cross-border attacks. Israeli Prime Minister Benjamin Netanyahu reaffirmed his previous statement that they will continue as long as it takes to restore calm for all of Israel’s citizens.

The situation favors gold because it is considered a safe haven in times of economic and political uncertainty.

In another tailwind for the bullion, three Chinese industry bodies called banned financial institutions from cryptocurrency products and services. The industry associations are the China Banking Association, the National Internet Finance Association of China and the Payment and Clearing Association of China. Under the ban, banks and online payment channels must not offer registration, clearing, trading and settlement services involving cryptocurrency. The statement warned investors against speculative crypto trading and said that virtual currencies are not supported by real value.

On the technical front, Reuters analyst Wang Tao predicted that spot gold prices might break a support level at $1,859 per ounce and slide into the $1,830-$1,847 range. The bullion has already broken a key resistance at $1,875.