Gold prices rose rapidly, supported by the issue of rising inflation and the risk of the Russo-Ukrainian conflict. US inflation data this week will be the focus of investors.
Gold prices shot to a one-week high in the trading session Monday (07/February) evening. Spot gold prices rose 0.6% to $1818.86 an ounce, as did the price of gold futures on the Comex in New York which rose to $1819.30. The following chart of XAU/USD shows a gain of 0.71% to $1820.31, the highest since January 27.
US CPI inflation data which will be released on Thursday this week is one of the determinants of the possibility of a Fed rate hike in the near future. The market estimates that the Fed's rate hike in March will reach 50 basis points.
"There's a bit of added safety-buying in the gold market... The main concern right now is where we are headed with inflation and how aggressive the Fed is going forward," said Bob Haberkorn at RJO Futures.
However, the analyst warned that the issue of inflation could be both a driver and a pressure for gold. Because, although gold is an anti-inflation asset, rising inflation tends to encourage the central bank to increase interest rates. High interest rates will make other investment assets more attractive than non-yielding gold.
The Russo-Ukrainian Conflict Also Supports Gold
Russia-Ukraine tensions also still affect the strengthening of gold prices, considering that gold is a safe haven asset when geopolitical conflicts occur. US Security Adviser Jake Sullivan said Russia could launch an invasion of Ukraine in the next few days. However, the diplomatic route is still wide open.
"We're still keeping an eye on each other. Russia could decide to take military action against Ukraine. Maybe in a few weeks from now. Or Russia could still choose a diplomatic route," Sullivan told Fox News on Sunday.
From a technical standpoint, analyst Edrward Moya at OANDA said that $1800 is a key level for gold. If gold can continue to hold above that level, then the bullion may continue.
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