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Inflation Concerns To Keep Supporting Gold Price

By Abhishek BansalCommoditiesApr 12, 2021 05:19AM ET
www.investing.com/analysis/inflation-concerns-to-keep-supporting-gold-price-200572490
Inflation Concerns To Keep Supporting Gold Price
By Abhishek Bansal   |  Apr 12, 2021 05:19AM ET
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Gold prices found support from a minor correction in US bond yields and sell-off into Asian equities during morning hours. However gold rally is capped due to strength in the US dollar index which is negative for commodities.

Gold prices are currently holding above $1,740 which is sharply higher from the recent low of $1,673.30. The dollar index is currently trading near 92.282 while the US 10-year Bond Yield is trading near 1.653 which is sharply lower from the recent high of 1.776.

Additionally, Inflation expectation is likely to support gold prices. Stronger-than-expected data suggests that inflation is picking up faster than expectations. Producer prices in the United States rose more than anticipated in March, resulting in the highest annual rise in 9-1/2 years and signaling the start of higher inflation in coming months.  

The US March core PPI rose +0.7% m/m and +3.1% y/y, against expectations of +0.2% m/m and +2.7% y/y. Also, China March PPI rose +4.4% y/y, stronger than expectations of +3.6% y/y and the largest increase in 2-1/2 years.

On other global economic data front, German February industrial production unexpectedly fell -1.6% m/m, weaker than expectations of +1.5% m/m. Also, French February industrial production unexpectedly fell -4.7% m/m, weaker than expectations of +0.5% m/m and the biggest decline in 10 months.

Gold prices continue to receive support from Dovish global central bank comments. Fed vice-Chair Clarida said the Fed would await evidence on whether they are reaching their goals on price stability and employment with "hard numbers on the labor market and on prices" before adjusting monetary policy. 

Additional support was received from ECB Governing Council member Stournaras dovish comments. He does not see any reason why we should withdraw the monetary stimulus. He also said that the current PEPP QE program should only be unwound when there is concrete evidence that inflation is improving on a permanent basis.

According to the CFTC Commitments of Traders report for the week ended April 6, net long for gold futures jumped by 21,981 contracts to 189,509 for the week. Speculative long position increased by 12,250 contracts, while shorts dropped by 9,731 contracts. 

Gold prices are likely to find support on higher inflation expectation, immediate support level is seen around $1,724 and $1,704 while it may face stiff resistance around 50 days EMA at $1,756 and 100 days EMA at $1,796.

Inflation Concerns To Keep Supporting Gold Price
 

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Inflation Concerns To Keep Supporting Gold Price

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Disclaimer: Mr. Abhishek Bansal is a new-age, first-generation entrepreneur, and the Founder Chairman of Abans Group, a quintessential diversified business group, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, and Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management.
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