Gold prices rise as inflation concerns persist

  • 17 November, 2021
  • 5:16 pm EET

Gold prices rose in trading on Wednesday, as concerns about inflation persisted, after a jump in US retail sales.

This comes despite the rise of the US dollar, which limited the expansion of the yellow metal’s gains.


Gold Prices Today

By 09:20 AM GMT (12:20 PM GMT), the price of gold futures – for December delivery – increased by 0.46%, to record the level of $ 1862.70 an ounce.

The spot price of the yellow metal also rose, by 0.51%, to $1,860.16 an ounce.

At the same time, the price of silver futures contracts – for December delivery – rose by 0.84%, to $ 25.21 an ounce.

The spot platinum price also rose by 0.63%, to record at $1071.41 an ounce, while the spot palladium price declined by 0.1%, to reach $2159.84 an ounce.


The Rise Of The Dollar

“Current events remain supportive of gold prices as inflation continues to rise, but the continued strength of the dollar limits the expansion of the yellow metal’s gains,” said Harshall Parrott, senior research advisor for South Asia at Metal Fox.

The dollar is close to a 16-month high, buoyed by data showing a surge in US retail sales last month, as a stronger US currency makes gold more expensive for buyers who own other currencies.


High Costs

A US report showed that high inflation has yet to dampen spending, even as concerns about rising costs pushed consumer confidence to a 10-year low in early November.

Federal Reserve officials said on Tuesday that they are vigilant about the ways in which high inflation can affect US households and dampen consumer sentiment, and want to control it.

The US Federal Reserve began phasing out bond buying this month, and the purchases are expected to end completely by mid-2022, and its next policy-setting meeting will take place in mid-December.

St. Louis Federal Reserve President James Bullard urged a speedy end to asset purchases to put the Fed in a position to raise interest rates as soon as spring.


Interest Rates

Parrott made it clear that the more positive economic data you get, the faster the bets will increase that interest rates will rise.”

He added that the ECB’s pessimistic stance has also supported the dollar, adding to bullion headwinds.

European Central Bank President Christine Lagarde is set to speak later on Wednesday, after she said on Monday that tightening monetary policy to curb inflation could stifle the euro zone recovery.

Britain’s labor market withstood the end of the government’s holiday plan last month, according to data that could ease ongoing concerns at the Bank of England about the risks of higher interest rates from a lower pandemic.


Alternate Opportunities

Gold is often viewed as an inflation hedge, but higher interest rates to contain price hikes raise the opportunity cost of the non-interest bearing metal.

Gold prices, often seen as a hedge against inflation, have benefited from easy monetary policy during the pandemic, but any price hike should reduce the attractiveness of bullion, because higher interest rates raise the opportunity cost of the non-interest bearing metal.


Gold Price Forecast

“Gold is likely to trade below $1,850 in the near term,” said Michael Langford, a director at consultancy Airgood, adding that the US Federal Reserve was unlikely to accelerate tapering.

Spot gold may retest the support level at $1,849 an ounce, and a break below that could lead to a drop to $1,831, according to Reuters Technical Analyst Wang Tao.

For his part, said external analyst at Kinesis Money, Carlo Alberto de Casa: “Investors fear inflation is getting out of control, so they are buying gold to hedge the risk.”

It reinforces expectations that higher prices may prompt central banks to raise interest rates in the dollar, and halt bullion’s advance.

De Casa added that interest rate increases remain a potential risk to gold prices, and a clear break above $1,875 – only – could lead to further gains.

After cutting gold’s gains, the US dollar, which also treats gold as a safe store of value, was boosted by better-than-expected US retail data, making the metal more expensive for overseas buyers.

For his part, Director of Kedia Commodities in Mumbai, Ajay Kedia, said: “Gold prices should fall to 1830 US dollars due to the rise in the dollar, and the statements of the members of the Federal Reserve regarding raising interest rates in 2022.. But do not expect a sharp drop in gold prices. ”








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