A new bullish impulse appeared in the gold market after the US inflation data reached the highest level in more than three decades. In this case, some analysts expect a return to $ 1,900 per ounce in the near future.
Gold has received new demand as inflationary pressures increase.
The latest inflation data point to widespread growth in consumer goods. Food increased by 5.3% compared to last year – the largest increase since January 2009. At the same time, gasoline prices rose by 6.1%, which was the biggest increase since March.
The rise in inflation occurs when consumers in the United States begin their holiday shopping and prepare for Thanksgiving.
It is worth noting that falling real interest rates helped gold to rise. According to the latest data from the consumer price index, the real yield of 10-year bonds declined to a record low of -1.235%.
Along with the fall in real yields and the break-even level, the difference between the nominal yield of 10-year bonds and treasury securities with inflation protection rose to 2.64%. Analysts note that this indicates that bond markets are exposed to even greater inflationary risk.
Bob Haberkorn, a senior commodities broker at RJO Futures, said this is just the beginning of gold's upward movement. Thus, his next target will be between $1,900 and $1,920.
According to Colin Cieszynski, chief market strategist at SIA Wealth Management, gold prices will rise to $1,920.
Cieszynski added that gold has surpassed such a path, despite the fact that the US dollar index also rose, and according to him, this is the very sign why gold will continue to move forward.
In recent comments by US officials, Treasury Secretary Janet Yellen tried to calm the markets, saying that the increased price pressure will not last long. Yellen added that if necessary, the Fed is also ready to act immediately to prevent inflation similar to the 1970s.
Yellen noted that she believes that inflation will not continue to grow next year due to the fact that the economy and demand will return to normal.
The scenario of the 1970s will not be repeated, explaining that fifty years ago, people also thought that politicians would not be able to cope with it, and inflation expectations have become an integral part of the American psyche.
However, economists now do not rule out an increase in inflation to 7% per year in the near future.