Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gold: The Slow-Motion Winner Of The Inflation Race? 

By Investing.com (Barani Krishnan/Investing.com)CommoditiesJan 21, 2022 05:01AM ET
www.investing.com/analysis/gold-the-slowmotion-winner-of-the-inflation-race-200615467
Gold: The Slow-Motion Winner Of The Inflation Race? 
By Investing.com (Barani Krishnan/Investing.com)   |  Jan 21, 2022 05:01AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Gold buyers: Think 2022—not 2020.

Anyone buying the yellow metal as an inflation hedge and expecting a rerun of the breath-taking rise that took it to record highs two years ago might be disappointed, to say the least.

In what some are already calling 'The Year of the Great Inflation,' gold could be just the asset to shield investors from price hikes, which are growing at their fastest pace in four decades, and to give investment portfolios that little extra shine. 

But do not expect its moves to be commensurate with inflation.

Gold Daily
Gold Daily

All charts courtesy of skcharting.com

If anything, gold in 2022 will likely gain by moving two steps forward and one back, much like how it has behaved since the start of January. Think of a slow motion clip instead of a blazing trailer.

Such an analogy characterizes how gold moves these days compared with recent years. Since this year began, the yellow metal has gained just $13 net, or 0.6%. 

What has made it stand out is its ability to hold ground in the $1,800 territory, despite pressure from the two-year highs in US 10-year Treasury yields and the accompanying rally at times in the dollar—both of which act as 'twin evils' to gold. 

The yellow metal has shown resilience despite expectations that the US Federal Reserve will embark on a series of interest rate hikes this year to combat 40-year highs in inflation, which grew by 7% in the year to December. Rate hikes are typically beneficial to the dollar and negative to gold. 

Gold Weekly
Gold Weekly

Gold also smashed past the key $1,830 resistance this week to reach a two-month high above $1,848. For six previous weeks, since early November, the $1,830 level was almost like an impregnable fortress to gold bulls. Technically, there are just three more key resistance points to clear in the quest for the next major level of $1,900.

Despite this, gold’s moves for this year almost seem pedestrian compared with the lightning pace of 2021's losses, when it fell 3.6% for its first annual dip in three years, and for its sharpest slump since 2015. 

The change is even more dramatic when compared with 2020—gold’s most glorious year in a decade when it went from a March low of $1,485 an ounce to an all-time high of just over $2,121 by August. It, of course, gave back a portion of those gains before another bumper gain in December.

Gold Monthly
Gold Monthly

So, what stands in gold’s way in a move toward the much-watched $1,900 and higher levels?

It is resistance levels at $1,860, $1,880 and $1,899, say Sunil Kumar Dixit, chief technical strategist at skcharting.com and a regular contributor of commodity technicals to Investing.com.

“Strong momentum above $1,836 and consolidation above the $1,843-$1,848 level may resume gold's bullish move toward its next target of $1,860, which is 23.6% Fibonacci level,” said Dixit in an analysis of spot gold.

“As long as gold holds above $1,825, look for $1,860 as the next target, followed by $1,880 and $1,899,” he added.

Dixit said firm price action since the start of the year and the breach of the long contested $1830-1835 wall had reinforced gold bulls’ minds to go for the $1,900 level, last attained in June. 

The yellow metal was also amply backed by strong stochastic readings across the daily, weekly and monthly charts, he said.

As a concession, in the short term, gold may take a small break and start some sideways consolidation between $1,843 and $1,836 before the significant move, said Dixit.

All said, gold remained vulnerable to the downside at under $1,836, he said.

“Trade below $1,836 may push gold down toward the horizontal support of $1,830 and next, to retest $1,825, which marks the 38.2% Fibonacci level,” Dixit cautioned.

“Weakness below this level may extend correction to $1,818 and $1,813.”

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

Gold: The Slow-Motion Winner Of The Inflation Race? 
 

Related Articles

Gold: The Slow-Motion Winner Of The Inflation Race? 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
Sam Iam
Sam Iam Jan 21, 2022 11:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
That's a myth. Gold doesn't move up in inflation. It it did, gold would be 10,000 per ounce. People losing faith in government is the only reason it's getting set to run to 5,000.
Barani Krishnan
Barani Krishnan Jan 21, 2022 11:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It's not a myth; there's ample evidence of the impact of inflation on the perception that gold is a good store of value in such circumstances, versus fiat currencies. But there have been breakdowns in such correlation over the years too. All said, it's human response that decides whether any asset is worth holding in times of crisis and there have been disbelievers of gold as well. That's why it isn't trading at $10,000 or, for that matter, even $5,000 or $3,000. Respectfully.
SunilKumar Dixit
SunilKumarDixit Jan 21, 2022 11:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Sam. Gold has been a real hedge in the times of mounting inflation, currency debasement and Geo political crisis, since long time and the fact remains undisputed. Yes, the recent past few years Gold has been kept artificially suppressed against its basic instinct.
Barani Krishnan
Barani Krishnan Jan 21, 2022 11:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
SunilKumar Dixit  Indeed. It's mind-boggling what the "bullion banks" (look them up) have been doing to suppress gold's natural reflex to inflation. Take away that manipulation and the resultant value of fiat currencies, including the dollar, will shock you.
Robert Flores
Robert Flores Jan 21, 2022 11:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani Krishnan where can I find that info? I was under the impression that the postponing of basel 3, along with finra regulations towards advisors , in combo with the stock market super bubble, not to mention crypto burst in the scene is what kept gold down
Barani Krishnan
Barani Krishnan Jan 21, 2022 11:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Robert Flores  WGC studies here than ran on Reuters: https://www.reuters.com/article/sponsored/beyond-cpi-gold-as-a-strategic-inflation-hedge
Puspa Malate
Puspa Malate Jan 21, 2022 11:03AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
PuspaBhujel
Robert Milling
Rob1287 Jan 21, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thats why I would also buy the miners in conjunction with gold to turbo charge returns. Same with silver. Miners can make 2 or 3 times the move of the underlying metal.
Barani Krishnan
Barani Krishnan Jan 21, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good perspective, Rob.
SunilKumar Dixit
SunilKumarDixit Jan 21, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Rob. Having positions in metals along with the mining stocks is often a great idea that mostly delivers.
Barani Krishnan
Barani Krishnan Jan 21, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
SunilKumar Dixit  Yes, though unfortunately those stocks suffer too from the effects of the bullion banks' suppression of gold.
Robert Flores
Robert Flores Jan 21, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I buy and sell GDXU, its 3x gold miners, 2 days ago it returned 20% in one day - i always sell some of it on spikes as it always returns to the mean and it has a long term carry cost
Barani Krishnan
Barani Krishnan Jan 21, 2022 10:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Robert Flores  That's for that valuable input, sir. Bests.
Zaw Zaw
Zaw Zaw Jan 21, 2022 5:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So thank Sir .
Ad Dh
Ad Dh Jan 21, 2022 5:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Ad Dh
Ad Dh Jan 21, 2022 5:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Ad Dh
Ad Dh Jan 21, 2022 5:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
00442045250709
Abdelraziq Abuaisha
Abdelraziq Abuaisha Jan 21, 2022 5:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Happy Friday dear Brother ,, wish you lovely days with family and friends🌷
Barani Krishnan
Barani Krishnan Jan 21, 2022 5:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Abdelraziq, wishing you a wonderful year ahead as well. Bests.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email