Rising markets and a weakening dollar are finding their momentum on Wednesday morning, driven by the impact of stimulus on the economy. Inflation expectations continue to increase, while a weak job market prevents the US from abandoning massive stimulus and the Fed from cutting on its bond purchases.
All this promises to push up the inflation rate. Inflation expectations are now at their highest in 7 years, but that is not yet a concern for the Fed. Barkin and Kaplan made it clear earlier in the week that they are not worried about it.
Against that backdrop, the markets have turned their attention back to instruments for a hedge against inflation, including Gold.
Gold is trading at $1843, approaching the area where the 50 and 200 SMAs, which represent short- and medium-term trends, have almost converged. Going above those levels would signal that we have seen a “false” dip recently, and investors have started buying back the declines.
The positive outlook for Gold is supported by the performance of the other precious metals. Silver and Platinum have been attracting attention with sharp jumps and renewed highs.
This morning, the price of an ounce of Platinum renewed its 6-year high, surpassing $1193.5. It then opens a straight path to the $1400 area, where Platinum was hovering from 2011 to 2014. The rise in its price is driven not by inflation expectations but by investors’ bets on increased industrial demand for the metal, used to manufacture electric cars’ components.
Silver has added for the fourth consecutive trading session, trading at $27.40. Although it is now below the highs at the start of trading in February, it is well within the long-term upward trend seen in March.
In all three metals, demand is driven by the stimulus’s nature. The manufacturing and construction sectors are recovering at a faster rate, creating a rush for raw materials. And the fact that consumer welfare has not suffered during the crisis year sets the stage for accelerating inflation, from which households and corporate investors are actively seeking protection in metals and cryptocurrencies.
The FxPro Analyst Team
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