The price of gold remains close to the high of the last two months, drawing support from lower US yields (that of the 10-year Teasury drops to 1.465%) and a weaker dollar (euro / dollar cross at 1.15793) in view of the macro data that could shed more light on the inflation picture in the United States.
At the moment, the price of the bar is down by 0.14% to 1,825 dollars an ounce, just 2 dollars less than the high of last September 7th. Silver also dropped 0.44% to $ 24.43 an ounce and platinum 0.1% to $ 1,054 an ounce. “In the short term, the market will look at macroeconomic data to find out whether central banks will move faster or later,” said Quantitative Commodity Research analyst Peter Fertig. “If the US consumer price index turns out to be above expectations, then the Federal Reserve will have to move faster,” Fertig clarified.
Major central banks last week indicated that interest rates will remain low for the short term, adding to the attractiveness of gold which had its best week since late August. However, the dislocation of global supply chains could lead to a high US consumer price reading tomorrow.
“With US bond yields falling and the dollar correcting downward, gold now has a realistic chance to advance further in the coming days,” predicted Jeffrey Halley, market analyst at Oanda in Asia Pacific. If gold breaks up its well-defined resistance zone between $ 1,832 and $ 1,835 an ounce, it triggers a reverse head and shoulders pattern that would target a return to $ 2,000 an ounce. The support is at $ 1,800-1,785 an ounce, although I suspect a drop below 1,810 will be enough to trigger the sell-off, ā€¯Halley warned.
From a longer-term perspective, explained Bert Flossbach, co-founder of Flossbach von Storch, the non-bearing precious metal gains if it can amply compensate for the annual loss in the value of money due to inflation. Over time, the price of gold rises and falls sometimes more and sometimes less than the inflation rate. Gold is often seen as a safe haven in times of great uncertainty, such as times of geopolitical stress, financial system crises and pandemics. This feature is, however, of minor importance or only relevant as a potential trigger for inflation.
The price of gold was forcibly fixed at $ 35 from 1933 to 1971, Bert Flossbach recalled. After the end of the gold standard, the price of gold was free to float since 1973 and quickly rose to over $ 100. The oil embargo after the Yom Kippur war led to a spike in oil prices and inflation. The price of gold temporarily rose to around $ 180, but then dropped back to just over $ 100. During the second oil crisis in the late 1970s, inflation rose to 15% in the United States.
“At the time, investors feared that inflation might spiral out of control and chose to buy gold instead of bonds, even though their bond yields were above 10%. The price of gold then hit an all-time high of $ 850. early 1980. Federal Reserve Chairman Paul Volcker braked shortly thereafter and raised the benchmark interest rate to 20%, a rate that is unimaginable today. Inflation expectations dropped and so did the price of gold. .
The financial crisis that followed did not generate inflation, despite the large amount of money created by central banks, because bank loans did not increase and the money never reached the real economy. The renewed fears of inflation during the euro crisis, which pushed the price of gold to a new high of $ 1,900 in 2011, also proved unfounded, so much so that in 2015 it dropped back to $ 1,053.
During the Coronavirus pandemic, bailout measures implemented by governments and central banks distributed a large amount of money to the population, which was also reflected in a significant increase in the money supply. Inflation expectations have risen as a result and, with some delay, inflation has also increased this year. The price of gold has already reached a new all-time high of $ 2,063 in August 2020. It has fallen by $ 300 since then, which could be simply due to the fact that the previous price hike was excessively good.
Whether the price of gold precedes or follows the inflation trend naturally depends on the period considered. Since the end of 1973, when it was left free to float, the price of gold has risen by 6.1% a year, which is two percentage points higher than inflation. “This” outperformance “of gold can be attributed to the growing prosperity of emerging markets, whose citizens have only been able to buy significant quantities of gold in more recent years,” Flossbach co-founder von Storch pointed out. which making predictions about the near future would be a difficult task.
However, “there are many elements that suggest that gold will continue to be a long-term hedge against inflation. Since central banks are unlikely to significantly raise interest rates to fight inflation, they do not. there is a danger of a sustained collapse of prices like in the 80s and 90s “, pointed out the expert. “Although the fact that gold producers are currently suffering from inflation may seem ironic, and so because the costs of energy, materials and personnel are increasing, while their selling price, that is, the price This has put stock prices under severe pressure in the past few months. The balance sheets of the major producers, however,

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