With June CPI data increasing at an unprecedented rate since 2008, inflation concerns are growing due to loose monetary policy and unorthodox stimulus. This has not yet translated into the gold price, which has not reached $1,900 per ounce since late last year.
Data from the USA last week suggest Gold could be on the move once again.
After the U.S. core PCE price index reached 3.5% in June, it fell to new lows. This was against the consensus forecast of 3.7%.
According to data released by the U.S. Department of Commerce Friday, the core PCE price Index was 0.4% higher than the 0.6% expected.
The June increase in personal income was mainly due to an increase in the compensation of employees. In June, government social benefits declined. According to the report, compensation saw an increase in salaries and private wages.
Some of the uncertainty that drives demand for gold has been eased by the Fed. However, we will need to be watching the US dollar closely at this stage, as it could melt down and cause gold to rise further.
Gold is a traditional ‘safe haven’ that can withstand market shocks like any other investment. However, it doesn’t guarantee that you are safe.
The stock market plunged after the world entered the first Covid-related lockdown, March 2020. However, gold prices, after a short bump, held firm.
At the moment the economy is recovering well, but the Biden Administration’s tax increases and excessive regulation will determine how long it lasts. This will cause us to go back to a stagnating economic environment.
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