The threat of inflation could push gold prices back to $1,830 next week. Rising inflation threat remains the most comprehensive support for the gold market as they see the potential of fiadollarsars to test critical resistance near $1,830 in the near term, Analisdollarser said. Cryptocoin. com
As we reported earlier on , gold prices rose to a six-week high on Friday morning as rising inflation pressures pushed rates on five-year bonds to a ten-year high.
What happens next golden week?
But gold lost significant ground, dropping $30 in minutes after Federal Reserve Chairman Jerome Powell tried to calm the threat of rising inflation. At an online conference hosted by the Reserve Bank of South Africa, despite significant solid problems, Powell reiterated his view that the US central bank is on track to reduce its monthly bond purchases before the end of the year. He added that monthly purchases are expected to be finished by mid-2022. However, not all analystsdollars are convinced that Powell and the U.S. central bank can resolve their rising inflation expectations.
Daniel Pavilonis, senior commodities broker with RJO Futures, said the rise in yields could indicate that inflation expectations are stabilizing and the Federal Reserve will have limited tools as activity begins to slow. Expert: “I don’t think the Federal Reserve has the ability to get inflation back under control. We see the risk of stagflation continue to rise and that will be good for gold and all commodities. Gold will be fine too, investors will see it as a value game. ”
Wilshire Phoenix’s managing partner, Wade Günther, said in a recent interview that he also did not see the Federal Reserve getting ahead of the inflation curve. Günther explained that inflation is currently driven by the ongoing disruption of the global supply chain. He added that the supply shortage may last longer than initially anticipated, meaning inflation will remain high. Analyst: “There is nothing the Federal Reserve can do to fix the supply chain. This is not inflation driven by consumer demand,” he said.
What will the FED do?
Powell noted that while k remains relatively positive about activity, there is an increased risk that supply chain disruptions will continue longer than expected, which could keep inflation high through 2022. However, he added that the fundamental situation is to resolve supply bottlenecks and pull inflation back to 2%. Inflation is also a growing global problem. Canadian data last week showed consumer prices rose to a 13-year high last month. In the UK, inflation pressures remained high and above the Bank of England’s target for the second month in a row.
Gold looks good, but still faces a lot of competition. While inflationary pressures continue to support gold fiadollars, analystsdollarser notes that the sentiment has changed somewhat as the precious metal faces new competition, especially from Bitcoin. Last week, Bitcoin prices rose to a new record high of over $65,000 per yellow ounce. The rally in the digital currency coincided with the launch of a new Bitcoin exchange-traded product (ETF). The ProShares Bitcoin Strategy ETF started trading on Tuesday and tracks the CME Bitcoin Futures. Some analystsdollarser noted that although the new Bitcoin ETF adds a new layer of legitimacy to the digital currency market, it is not a major game changer for gold. Ole Hansen, head of commodities strategy at Saxo Bank, said, “Yes, Bitcoin has received some momentum and capital from the gold market, but gold is far from outdated. Does every gold investor sell their gold to buy Bitcoin? No,” he said.
Bitcoin competitor to gold?
Hansen added that stock markets, which are trading at close to record levels, are also strong competition for gold. However, he said momentum could quickly turn in gold’s favor if the precious metal rises above $1,835 an ounce. US dollar remains headwind for gold. Analisdollarser says they are still keeping an eye on the US dollar, as well as Bitcoin and equity markets. The US dollar index managed to hold the critical support above 93.50 points.
Equiti Capital market analyst David Madden said that although gold sees room to test resistance around $1,830, he does not expect this level to break. He added that a key risk event for gold and the US dollar next week will be the monetary policy meeting of the European Central Bank. The euro lost some value against both the British pound and the US dollar; however, Madden said that the ECB probably likes this current environment and will be careful not to change the current market sentiment. He added that if President Christine Lagarde uses the dove tone and downplays the inflation outlook, it could weaken the euro against the US dollar, adding that it would be negative for gold.
The ECB will be the main focus next week, while the Bank of Canada and the Bank of Japan are also holding monetary policy meetings. The Canadian bank may be under pressure to tighten monetary policy sooner than expected after inflation soared to a 13-year high in September. The k file will also contain some important US data. Tuesday includes US consumer confidence data for October and new home sales numbers for September. Wednesday is the release of the durable goods report, which will measure the health of the nation’s manufacturing sector. Thursday markets will take the first reading of third-quarter U.S. GDP. Any shortcomings in this report could be good for gold, Analisdollarser said, as it would raise fears over growing fears of stagflation. The week ends with the release of October inflation data and personal consumption and income figures.