The price of gold may soon surge considerably, brought about by the increasing inflationary pressures that are improving bullion’s appeal. Earlier this week, the price of gold stood fast, despite gold futures in the United States recording a 0.1% gain and spot gold dropping by 0.2%. However, despite the modest decline, spot gold is still up by almost 8%.
Concurrently, the U.S. dollar, which has often been used as an alternative to bullion, is now in its second consecutive month of decline, which can be observed in the Dollar Index, which had dropped by 0.2% on Monday. The yield on U.S. treasuries also declined, which decreased the opportunity cost of holding noninterest-bearing gold.
SPI Asset Management managing partner Stephen Innes stated in an interview that gold bulls were targeting $2,000, adding that many hoped it would go even higher. Additionally, data from last week demonstrated that consumer prices in the U.S. had increased significantly in April, with an underlying inflation measure surpassing the 2% target set by the Federal Reserve. This was the biggest annual gain posted since the early 1990s.
Some officials in the Federal Reserve have stated that the present price pressures are to be expected as the economic opens up amid pent-up demand, noting that this will be temporary as issues with supply subside. The Federal Reserve uses the PCE price index for its inflation target. In comparison with last year, it increased by nearly 4%, which is its biggest jump in over a decade.
Carsten Fritsch, an analyst of the Commerzbank, stated that real interest rates would continue to drop even further into the negatives, as long as the Federal Reserve refused to alter its monetary policy in order to tackle increasing inflation. This, he said, would be beneficial to gold.
Possible uneven economic recovery brought about by the resurgence of the coronavirus in some nations and the rising inflation also allowed bullion to make up for this year’s losses last month. This has also prompted some speculators and hedge funds to increase their net-long position in the precious metal as investor interest returns. Furthermore, last month holdings in exchange-traded funds that are bullion-backed increased for the first time since the year begun. However, the gains still didn’t meet the numbers recorded during 2020’s rally.
In a note to Bloomberg, Saxo Bank A/S head of commodity strategy Ole Hansen noted that fund positions in futures and the recovery in ETF holdings supported by bullion remained low, which indicated that most investors weren’t convinced about the short- to medium-term course.
The expected continuation of the bull market for gold is likely to spur on companies such as GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF), which are engaged in exploring for and extracting gold from mineral-rich properties.
NOTE TO INVESTORS: The latest news and updates relating to GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF) are available in the company’s newsroom at http://ibn.fm/GHVNF
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