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#1 09-06-2021 14:56:29

johnedward
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From: Paris - France
Registered: 21-12-2009
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Gold/USD: Gold climbs as inflation fears intensify

Gold/USD: Gold climbs as inflation fears intensify


The gold price rebounded from under $1700 in early April and has recovered over $200 in the meantime. The all-time high set last year is likely to be broken if the price rises above $1,950 and inflation continues to rise.

One of the headline events during the year of the virus situation was the price of gold hitting a new all-time high above $2,000. As investors sought the safety of the yellow metal, the move above $2,000 appeared to be just the beginning of a new, more sustained uptrend.

Even Warren Buffett, the legendary investor, invested in gold in the midst of the pandemic. Yet after making this all-time high, the price of gold fell by several hundred dollars until it bottomed out below $1,700.

The $400 drop took place over a seven-month period. For most of this period, the USD lost ground against its G10 counterparts, resulting in one of the most interesting divergences seen during the pandemic.

Yet despite the decline, gold as a financial asset performed well last year. It rose against all major currencies, setting a record against the USD at $2,066 and gaining 24.5% over the year.

And then inflation fears rose.

http://www.forex-central.net/forum/userimages/GoldPerformance.jpg


Inflation fears trigger gold's upward movement

During the pandemic, all central banks and most governments reacted in the same way. By providing monetary and fiscal support, they leveled the playing field in the financial markets. Suddenly, there were no more divergent monetary policies to speculate on. As a result, the correlation between financial assets tightened.

Now that central banks are preparing to withdraw some of the stimulus, it is time to see how the gold price reacts. From a technical perspective, it rallied this April when US inflation data was much stronger than the market expected.

http://www.forex-central.net/forum/userimages/GoldChart.jpg


From a technical point of view, the bearish arguments are still valid, despite the recent rally from the lows. Price action has formed a series of lower highs that have remained in place since the middle of 2020.

However, a move above $1,950 breaks the streak and will likely trigger expectations for a new high attempt. Today, US inflation data will be key for medium to short-term action in gold. Higher-than-expected inflation could move gold prices closer to the round $2,000 figure.

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"Anything worth having is worth going for - all the way." - J.R. Ewing

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