Inflation Is Pushing the Gold Price up To Its Highest

As inflationary pressures continue to increase, gold prices remained firm on Monday. However, gold prices should achieve their most significant monthly increase since July 2020.

As of 11:45 am Eastern Time, spot gold fell 0.2% to US$1,904.41 per ounce but still rose 7.7% this month. U.S. gold futures rose slightly by 0.1% to 1,908.20 US dollars per ounce.

At the same time, the U.S. dollar, usually regarded as a substitute for gold and silver, will fall for the second consecutive month, with the U.S. dollar index falling 0.2% on Monday. The yield on the 10-year U.S. Treasury bond in the U.S. has also fallen, thereby reducing the opportunity cost of holding interest-free gold.

Investors wait for critical U.S. employment data to be released later this week.

Inflation risks remain the focus, which will provide clues to the progress of the economic recovery.

Data on Friday showed that the U.S. consumer price index soared in April. An indicator of potential inflation exceeded the Fed’s 2% target and set the largest annual increase since 1992.

The PCE price index used by the Federal Reserve for its inflation target rose 3.6% from the same period last year, the largest increase since 2008.

There are signs that inflation is accelerating. Due to the recovery of the covid-19 epidemic in some countries, the economic recovery may be uneven. Thus, this month gold prices have recovered the 2021 decline.

Investor interest has also resumed. The holdings of gold-listed trading funds in May rose for the first time in four months. Although, the increase was still far below the record increase last year.

Head of Commodity Strategy for Saxo Bank warns that ETF holdings, backed by fund positions in gold and futures, weaken. It shows that many investors are still not confident about the short- to medium-term direction.

Today’s Gold Price Forecast

Supported by positive international trends, India’s gold and silver prices rose on Tuesday. With the dollar weakening, gold soared to a nearly five-month high of $1,914.26 and inflation concerns. The gold August futures traded at 134 rupees, or 0.23%, to 49,484 rupees per 10 grams, compared with the previous closing price of 49,349 rupees on the multi-commodity exchange.

The cost of July silver futures is 72,668 rupees per kilogram, 800 rupees or 1% higher than MCX. Silver futures closed at Rs 71,898 per kilo on the previous trading day. Globally, spot gold rose 0.2% to US$1,911.45 per ounce. The dollar index fell 0.26% to 89.757. Among other precious metals, silver rose 0.6% to US$28.22 per ounce, while platinum rose 0.5% to US$1,192.22.