Analysts: Gold Price Will Likely Rise on Upcoming Inflation

Gold price holds onto bullish level as markets brace for data reports

Bullion.Directory precious metals analysis 07 June, 2021
By Peter Reagan
Financial Market Strategist at Birch Gold Group

While the previous week was a very volatile one, including a $40 pullback, the gold price held onto a key bullish level. Now, all eyes are focused on the myriad of data releases this week, which will offer more clues regarding domestic and international central bank policies.

The key points include the Federal Reserve’s June 16 monetary policy meeting, Thursday’s CPI and U.S. jobless claims report. In addition, we’re watching for interest rate announcements from the Bank of Canada and the European Central Bank.

TD Securities’ head of global strategy Bart Melek explained how gold’s sensitivity to higher yields and a higher U.S. dollar has been offset by factors like the disappointing U.S. employment report in May:

The weaker economic data are better for gold. Many thought the employment report would beat expectations as the ADP data did on Thursday. If employment continues to be lousy, the Fed wouldn’t see inflation as an issue. And yields are not likely to react either, which is good for gold.

Melek expects gold to establish a new range between $1,855 and $1,935, with $1,920 as the highest point that could be seen as early as this week.

Bob Haberkorn, a senior commodities broker at RJO Futures, sees a strong bullish trend for gold due to various indicators. He, too, expects gold to inch towards $1,920 before attempting to recapture its all-time high, set in August. Haberkorn added, “The only thing that would disrupt gold’s upside is any new hints of monetary policy tightening.”

ING chief international economist James Knightley said inflation data will be the most important thing to watch out for. Knightly mentioned some specific expectations:

We are likely to see consumer price inflation rise further – our forecast is 4.8% year-on-year for May with core (ex-food and energy inflation) rising to 3.3% from 3%. For the former, this would mark the highest inflation reading since 2008 – when oil prices surged to $146/barrel – while for the core rate, it would be the strongest reading since 1993!

So we can expect either 13-year record inflation, or possibly 28-year record inflation? Either way, if Knightly’s team is correct, gold’s short-term future looks bright indeed.

This article was originally published here

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