For several weeks, the price of gold practically did not move. This is despite the fact that inflation in the United States and Europe has reached the highest levels since the 1990s. Over and over again in the financial media, one has read that gold is not such a good hedge against inflation.
Recently, however, one could already observe a growing strengthening of the gold market. High volatility, numerous attempts to overcome important technical barriers, increased inflow of traders to the gold futures markets. Finally, there was a long-awaited technical breakthrough.
Thus, the foundation for a new rally was laid. And after unexpectedly high inflation data in the US, we saw an even more significant jump in gold prices - this happened on Wednesday. In the afternoon, the yellow precious metal gained 2%, and one ounce of gold was again worth more than $ 1,800.
But why is the price of gold rising right now? Because we have already experienced significantly higher inflation rates for at least eight months. The future and the expectations associated with it are traded on the stock exchange. Until now, many investors seem to have believed in central bank statements that increased inflation was only a "temporary phenomenon." The fact that the consumer price index in the United States rose by 6.2% compared to the previous year came as a surprise - and anything but "embedded in the price of a precious metal."
Monetary policymakers may still be right. However, the time for the slowdown in the rise in gold prices may be over. It is not the actual inflation (whatever is meant by it) that is the decisive factor for the development of prices in various asset classes, but the perception of the players and, as a result, their behavior.
So now it turns out that the 5.4% rise in US inflation between June and September is not the final reading. A further jump of another 0.8% was comparatively huge. And this spike in inflation not only raises inflation expectations among investors and wealth managers. Perhaps even more significant is the fact that the forecasting quality of monetary policymakers is being called into question even more, and the credibility of monetary policy makers is further damaged.
The growing uncertainty about the stability of the monetary system and the growing distrust of the guardians of the monetary system is one of the strongest motives for buying gold. Thus, the foundation has been laid for the next price rally in the gold market. At the very least, the return of this momentum should be a serious challenge for the monetary authorities. We can say that now there are even more reasons for the rise in prices for precious metals.