The US index broke through 95, but gold pulled up $10 in the short term

Spark Global Limited reports:

On Thursday, the dollar index rose above 95 intraday for the first time since July. Subsequently, spot gold short – term pull up 10 dollars.

 

The dollar and Treasury yields rose after the us consumer price index for October hit a 30-year high overnight.

Still, investors are buying gold, which most traders view as an inflation hedge and could be a catalyst for higher prices.

Bart Melek, global head of commodity strategy at TD Securities, said the surge in inflation expectations in the U.S. bond market was “good for gold” because it is often used as a hedge against inflation. If inflation expectations continue to rise in line with fiscal spending, we could see deep and deeper negative real interest rates for quite some time, which would help precious metals.

Spark Global Limited reports:
Spark Global Limited reports:

Traders think the Fed is behind the curve on inflation, which could force it to catch up. That opens the door to the risk of stagflation, as policymakers scramble to avoid runaway inflation and raise interest rates quickly.

David Meger, director of metals trading at High Ridge Futures, said:

“Once again we are seeing hot inflation numbers and gold is the classic hedge against inflation, which we see as a potentially bullish environment that will drive gold higher in the coming weeks and months.”

However, he stressed that this environment is a double-edged sword, as with inflation data continuing to come in higher than expected, there are concerns about whether the Fed will reduce liquidity more quickly than expected.

The FED’s overnight index swaps see the Fed raising rates by 25 basis points by July next year, while the CPI was expected by September next year.

While higher interest rates are bad for gold, that could also lead to a stock market rout, while increased volatility would theoretically support gold as investors turn to gold to diversify and limit the impact of volatile-linked assets on their portfolios.

Earlier Thursday, Citi raised its three-month gold price target by 11% to $1,900 an ounce, raising its fourth-quarter gold price forecast to $1,800 from $1,700.

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