In anticipation of the publication of the consumer price index in the US, gold has risen in price following the results of four consecutive sessions. Is there any hope that its rally will continue after the release of inflation data?
Today investors are focused on US statistics. The culmination of the day will be the release of two key indicators: monthly and annual inflation rates in the United States for January.
According to preliminary estimates of economists, the consumer price index will show an increase of 0.5% on a monthly basis. And annual inflation will rise to 7.3%, which is the highest since 1982.
The prospect that America will again face a record surge in prices has raised the demand for gold in recent days, because the precious metal has historically been considered one of the best defensive assets against inflation.
At the moment, bullion has completed four consecutive sessions with an increase. Last time, the yellow hedge instrument rose by 0.5%, or $8.70. At the close of trading on Wednesday, it was worth $1,836.60 per ounce.
The weakening of the dollar contributed to the growth of quotes. On the eve of the release of inflation data, the greenback sank by 0.1% compared to its main competitors.
Another positive factor for gold was the decline in the yield of 10-year US bonds. Yesterday, the indicator fell to 1.92%, although the day before it reached the highest level since the summer of 2019.
Meanwhile, a rather unusual situation has developed in the market now, when it is not gold that can benefit from another jump in inflation, but the tandem of the dollar and the yield of US government bonds.
If the economists' forecast of price growth turns out to be correct, it will most likely force the Federal Reserve to take emergency measures to combat inflationary pressure.
There is a high probability that in conditions of record high inflation, the US central bank may raise interest rates immediately by 50 basis points. Recall that the first increase is scheduled for March.
A more aggressive exchange rate of the US central bank will raise the dollar and bond yields, which will negatively affect the value of gold.
However, the precious metal may take a different path, continuing to move up in the short term. If Fed officials deem the inflation rate uncritical for a sharp rate hike, this will be an ideal environment for gold.
In this case, the incessant price growth will further exceed the targets and overtake the central bank's schedule. It will be much more difficult for the Fed to tame raging inflation.
