TOPICS IN THIS GOLD ANALYSIS
- Linflation: a bullish catalyst for precious metals
- Gold : prices are moving in a downtrend channel
Inflation: A Bullish Catalyst for Precious Metals
Gold and silver have come back strong this week as growing inflation concerns and negative real yields have benefited precious metals.
Friday’s pullback translates to gold’s inability to hold above $1,800, as well as news of a Bitcoin futures ETF launch, which may take place on Friday. next week.
The yellow metal, which has always been seen as a hedge against inflation, gained a boost on Wednesday after consumer price inflation (CPI) rose 5.4% year on year last month in the United States. .
Some investors see an ounce of gold as a way to hedge against rising prices that erode the value of currencies. Still, higher inflation calls for tighter monetary policy from central banks, which should mean higher returns. Nevertheless, a rise in yields is generally bad news for gold.
As inflation continues to build in the economy, the chart below shows the incredible relationship between the price of gold and the CPI since the global financial crisis.
The yellow metal rose by more than 75% from August 2018 to August 2020, reaching all-time highs during this period. Second, with a CPI around 1%, few investors expected inflation to pose a risk to the economy.
We are now on a higher peak than expected (5.4%). Gold looks fundamentally cheap, but oversold as inflation continues to gain ground. As such, we believe the historic relationship between precious metals and rising consumer prices will continue to be strong.
Gold: prices are moving in a downtrend channel
On the graphic side, the price of gold tried to cross the resistance zone towards 1,785 / 1,795 dollars coupled with the moving average 200 periods this week. In the medium term, prices are moving inside a downward channel, so the breakout of the upper limit would constitute a technical signal for a bullish recovery.
Support levels to try to buy cheaply are clearly identified. They sit at $1,750, $1,725 and around $1,685. A fall back to these levels cannot be ruled out before picking up again.
Assuming that the buyers come forward and manage to extract themselves from the top of the channel, then a bullish restart should take place in the price of gold. Finally, the key pivot to trigger a new wave of upside is found at $1,830.
To sum up, the yellow metal has not said its last word, the asset could very quickly return to center stage and catch up in the next weeks.
CHART DU GOLD IN DATA DAILY
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