Gold ready for an increase on inflation rise

Gold ready for an increase on inflation rise

 Gold was higher on Wednesday morning in Asia but settled near a recent low as robust U.S. retail sales reading drove the dollar near to a 16-month high.

Gold prices increased almost to a five-month high last week following official figures revealed that inflation in the U.S. remained prevalent.

As stated by the U.S. consumer price index (CPI) released last week, the country’s consumer prices increased 6.2% year-on-year in October, the enormous inflation rush following December 1990. It also exceeded market expectations of 5.9%.

Core CPI, excluding food and energy, rose 4.6% annually, the fastest gain in more than 30 years.

The escalating inflation successfully drove the price of the yellow metal higher. On Nov. 10, gold prices surged as much as 2% to peak at $1,863.9 per ounce, scoring its highest level after June.

Gold prices bound higher to $1871.3 on Friday and later settled at $1,868.5 an ounce, meaning gold rates have been rising for two weeks straight. Receive latest price updates on gold and other precious metals

Fed Flags that Interest Rate Hike Is Off the Table Till 2022

While tapering often indicates the start of an interest rate hike, Fed Chair Powell confirmed that the Fed holds the benchmark interest rates at near zero. 

He quoted “maximum employment” as the notable mandate for any interest hike. The Fed is getting closer to reaching its goals on inflation and employment.

He stated the first-rate hike might happen in 2022 at the earliest, which is uplifting news for gold.

Gold Price Predictions by Wall Street Analysts

Analysts suspect gold to maintain its bullish momentum until mid-2022. Specifically, Goldman Sachs is attending for $2,000 for gold, while Soc Gen predicts gold prices to stay near $1,950 an ounce early next year.

Conversely, Morgan Stanley is less optimistic, stating that gold could experience a challenging environment next year. Its base case for gold is $1,675 per ounce for the first quarter of next year.