Higher inflation may benefit gold

13 July, 2018

Higher inflation in the US usually translates to rising interest rates which is usually negative for gold, as higher rates mean bigger yields which tends to leave investors chasing the US dollar for bigger returns.

Data out yesterday showed that U.S. consumer prices jumped to their highest level in nearly 6.5 years, rising to 2.9 percent which was slightly up from 2.8 percent in the previous month.

This is bound to keep the US Federal Reserve on track to lift interest rates further so the inflations figures remain under control.

The US economy has not had to deal with rising inflation for more than 10 years and the last time around it caused havoc to the American financial system so investors are poised to be weary this time around and put their money into safe haven assets such as gold in order not to get burnt again.

“Interest rates are going to move higher but real rates will remain low and I think gold will do just fine in that environment,” he said. “I still like gold as an important diversifier as inflation moves higher.” Said Axel Merk, president and chief investment officer of Merk Investments.

The trade tariffs recently introduced by US president Donald Trump are also expected to lend some support to the gold price as investors, wary of the unknown one again seek out safer places for their money and gold is expected to be near the top of the list.

“Although tariffs aren’t good, I don’t see signs that this economy is going to tip into a recession any time soon. I think this economy is going to overheat,” he said. “An important issue though is that people don’t know what is going to happen and they don’t know how to invest in the long-term.” Mr Merk added.


Source link  
Aussie dollar up on Chinese data

The Australian dollar remains firmly above the US70c mark in today’s trading session after a strong round of data out of China alleviated...

Pound may hit $1.37 by years end

The British pound is expected to face increased volatility over the coming months as the deadline approaches for the UK to leave the EU at the end...

Has the US dollar peaked?

The US dollar has made significant gains against all the major currencies over the last month as worries over trade tensions between...


Pound may suffer in the long term

The British pound continues to power ahead in today's trading session after yesterday's developments in the British parliament that many see as ending...

Gold needs to remain above $1300

The gold price has staged a substantial rally since last week after the US Federal Reserve latest board meeting where they stated that any move...

Only way for oil is down

The oil price has now broken down through the all important $50 mark, which is a physiological blow to any chance of a rally, and according to...


D-Day for the pound

Traders and Fund managers alike are expected to be glued to their desk on Tuesday evening UK time as the British parliament vote on the Brexit Deal put before them...

Will gold's rally continue?

After spending the majority of November range bound, the gold price has finally broken out to the upside as investors seek out safe havens from the anticipated...

Dollar could weaken for years

The US dollar has been the star performer in the currency markets this year, gaining solidly against all the major currency but some are beginning...

  


Share it on:   or