High Inflation Might Not Be Enough to Push Gold Prices Up
Gold prices are hovering at $1828-1830 per troy ounce ahead of the release of the Consumer Price Index (CPI) data in the United States later today. Gold is close to early September highs.
The area of $1835-1837.5 per ounce has acted as a resistance for three times in July-June 2021, and now a fourth time is possible. I have mentioned before that the technical picture for gold paints an upward signal. That is confirmed as gold prices have passed through the sloping resistance that comes from June’s peak and forms the upper side of the triangle that was formed over the last three months.
The height of the triangle applied to the breakthrough point allows for the suggestion that gold prices may surge to $1940 per ounce. But we may see prices speeding up only after a breakthrough of the above-mentioned resistance at $1835-1837.50 per ounce. Once prices cross this level we may expect them to move towards the new target at $1915-1920 per ounce. The nearest support level would be at $1815 per ounce.
It is also worth noting that a breakthrough of the $1800 level was achieved after the U.S. Federal Reserve (Fed) announced the tapering of its bond buying programme at its recent meeting on November 3rd. Even if the Fed still calls inflation transitory, high inflation may continue throughout most of the period next year. Sooner or later investors may ask themselves what instruments are suitable to tackle inflation, is there an alternative to the stock market? And these thoughts may take them to a commodity market with precious metals as their first choice.
It is noteworthy to mention that high inflation may not be enough for gold prices to rise. Bullion prices may need low investors’ confidence and excessive fears to rise further. On the contrary, the brighter the future prospective, the more gold could lose against other instruments.
The area of $1835-1837.5 per ounce has acted as a resistance for three times in July-June 2021, and now a fourth time is possible. I have mentioned before that the technical picture for gold paints an upward signal. That is confirmed as gold prices have passed through the sloping resistance that comes from June’s peak and forms the upper side of the triangle that was formed over the last three months.
The height of the triangle applied to the breakthrough point allows for the suggestion that gold prices may surge to $1940 per ounce. But we may see prices speeding up only after a breakthrough of the above-mentioned resistance at $1835-1837.50 per ounce. Once prices cross this level we may expect them to move towards the new target at $1915-1920 per ounce. The nearest support level would be at $1815 per ounce.
It is also worth noting that a breakthrough of the $1800 level was achieved after the U.S. Federal Reserve (Fed) announced the tapering of its bond buying programme at its recent meeting on November 3rd. Even if the Fed still calls inflation transitory, high inflation may continue throughout most of the period next year. Sooner or later investors may ask themselves what instruments are suitable to tackle inflation, is there an alternative to the stock market? And these thoughts may take them to a commodity market with precious metals as their first choice.
It is noteworthy to mention that high inflation may not be enough for gold prices to rise. Bullion prices may need low investors’ confidence and excessive fears to rise further. On the contrary, the brighter the future prospective, the more gold could lose against other instruments.
