Gold headed for the biggest monthly advance since July, with inflation risks in focus ahead of key U.S. jobs data due later this week that will offer clues on the economic recovery.

Some Federal Reserve officials have said that recent price pressures are to be expected as the economy reopens amid pent-up demand, and should prove temporary as supply glitches abate. The PCE price index — which the Fed uses for its inflation target — rose 3.6% from a year earlier, the biggest jump since 2008.

Bullion has erased its 2021 losses, and is one of the best-performing metals in May, amid signs of rising inflation and a potentially uneven economic recovery due to the resurgence in coronavirus cases in some countries. Investor interest has also returned, with hedge funds and other large speculators boosting their net-long position in gold to the highest since early January, while holdings in bullion-backed exchange-traded funds have climbed in May following three straight months of declines.

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