Gold inches higher amid U.S rising inflation figures

GOLD FUTURES CLOSED THE WEEK’S TRADING ACTIVITIES in bullish territory, while inflation rate hike amplified in the U.S following the November reading for the Consumer Price Index which climbed 6.8 per cent to maintain its upward swing on level with October, which was already at 40-year highs.

U.S. gold futures’ most active contract, December, settled up 0.5 per cent at $1,784.80 an ounce, gaining 0.1 per cent for the week.

Dealers noted that in times past, gold had fared badly over news of inflation rate hikes, but in this case, traders in bullion appeared focused on the inflation story, allowing to let slide talk of potential Federal Reserve action to right the situation.

Ed Moya, analyst online trading platform OANDA, said gold is slowly regaining confidence after a hot inflation report mostly matched estimates.

“A lot of the inflation is stickier than anyone wants and that should keep gold’s medium- and- longterm outlooks bullish,”he noted.

Moya, however, cautioned that an accelerated rate hiking cycle is a big risk and could trigger panic selling in gold, though there does seem to be a high chance of the Fed doing that now.

“Gold just needs to survive a firm consensus on how many rate hikes the Fed will start off with next year,” he added..

Christopher Ecclestone, principal and mining strategist at Hallgarten & Co. in New York, observed that the inflation beast is ‘out of its cage,’ and the Federal Reserve is now forced to respond.

In terms of inflation and its economic impact, Ecclestone stated that investors who have confidence that the Fed will be able to control inflation are mistaken.

“The inflation beast has gotten out, and it’s going to take a lot of effort to get it back into its cage,” Ecclestone emphasized. “This will ultimately impact property markets. It’s going to impact companies that are highly leveraged. We are already seeing big property crashes in China that are linked to overextended property developers,” he said.

Ecclestone further explained that investors will look toward gold as the next sure bet if property prices begin to drop.

Ecclestone added that he expects gold to reach $2,000 an ounce over the next year and then climb towards the $3,000 level in the next four years after that.

“Gold ultimately needs to rise because people do not have faith in keeping their money in fiat as a means of protecting their currency,” he stressed. “I would not be surprised if we see gold above the $2,000 level over the next 12 months. My five-year outlook for gold is $3,000 per ounce,” he stated.