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Gold straddles inflation to reach five-month high

Gold

The gold plateau of 2021 is showing signs of recovery after spot gold prices hit a five-month high last Friday, topping $US1860 ($2532) per ounce.

Following May’s price surge, which saw the market rise above $US1900, the price endured a tough time, falling as low as $US1723 per ounce on August 10.

But it has recovered since then, which comes as inflation surges in the United States. Inflation reached 6.2 per cent in the US in the 12 months to October 2021, its highest figure since November 1990 and above the 5.8 per cent forecasts.

World Gold Council head of research Juan Carlos Artigas said soaring inflation could be a prevailing trend going forward, subsequently benefiting gold.

“Looking forward, we believe there is a considerable risk that higher inflation may persist as a by-product of knock-on effects from the monetary and fiscal policies put in place as a response to the COVID-19 pandemic,” he said in a LinkedIn post.

“This, in turn, should support investment demand for gold as inflation hedge.”

Fat Tail gold investments editor Brian Chu believes market trajectories favour the gold market going forward.

“There are economic conditions right now that suggest to me that gold is going to catch up, it may take a long while … I will temper expectations, but I have not changed my perspective and my confidence in gold.”

Chu forecasts interest rate increases to play a factor in gold price performances, with investors likely to turn to safe havens such as gold as stock prices begin to drop.

The Reserve Bank of New Zealand raised interest rates in October for the first time in seven years. Australia’s Reserve Bank has remained steadfast on interest rates over the last year or so.

The gold price was trending at $US1863 at the time of writing.

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