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Gold at Cusp of $1,800 in Belated Response to U.S. Inflation Spike

CommoditiesOct 13, 2021 03:20PM ET
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© Reuters.

(updates with settlement prices)

By Barani Krishnan

Investing.com - Gold jumped $35 an ounce, or 2%, to approach the key $1,800 level on Wednesday in response to weeks of surging oil and other commodity prices.

The rally was apparently triggered by latest U.S. CPI data that proved to be another affirmation of inflation in the world’s largest economy.

After weeks of being stuck in the mid-to-lower $1,700 levels, the move helped validate to some extent the “safe-haven” and ‘inflation hedge” labels typically applied to the yellow metal, which many investors see as the last resort in times of political and financial troubles.

“A Jekyll and Hyde inflation report sent gold prices on a wild ride,” Ed Moya, analyst at OANDA, said, referring to the CPI report. “Longer lasting inflation just went from rushing interest rate hikes forward to destabilizing large parts of the global economic recovery.”

Moya noted that markets this week went from pricing in a potential December 2022 U.S. rate hike to having high confidence that September 2022 will be the so-called lift-off time for the Federal Reserve.

U.S. gold futures’ most active contract, December, settled at $1,794.70 per ounce on New York’s Comex, up $35.40, or 2%. The session peak was $1,797.30.

The last time gold crested at $1,800 was on Sept. 15.

Wednesday’s rally came after the Labor Department reported that consumer prices in the United States rose by 5.4% in the year to September as rallying commodity markets from oil to coffee kept the pressure up on the world’s largest economy.

On Tuesday, the International Monetary Fund cut its outlook for 2021 world growth to 5.9% from a previous forecast of 6%, saying the momentum for the global economy has weakened while uncertainty has increased.

The IMF is also concerned that surging commodity prices will force central banks into tightening cycles that could trigger selloffs in global equities. Oil prices at seven-year highs of above $80 per barrel is pushing some central banks to consider raising interest rates quicker than they had previously planned.

While gold appeared to have a tentative resistance at $1,800, “that might not prove to be too difficult to breach if risk aversion runs wild”, Moya said.

Gold at Cusp of $1,800 in Belated Response to U.S. Inflation Spike
 

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Comments (4)
Kevin Burr
Kevin Burr Oct 14, 2021 12:04AM ET
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Inflation up. Gold down. Also china not even buying
TARA CHAND AGRAWAL
TARA CHAND AGRAWAL Oct 13, 2021 7:22PM ET
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Hold gold price may touch to 1850 USD range binding to 1800 as the inflation rises in Europe and China very much.
Paul Barron
Paul Barron Oct 13, 2021 3:41PM ET
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Gold moves at its own speed. News pops mean nothing. In jan when golds is 2300 what will be the story of why? Its the printing of money! Fed = robbery!!! Main street media will never expose the truth.
Peter Cooper
Peter Cooper Oct 13, 2021 12:47PM ET
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If inflation is on the way up, so is gold and silver is even higher today. if you are quick gold prices are also cheap buy may not be for much longer.
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Millennial Metals
Millennial Metals Oct 13, 2021 12:47PM ET
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I am ALL IN physical silver and gold mining stonks
Barani Krishnan
Barani Krishnan Oct 13, 2021 12:47PM ET
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That appears sensible. I don't trade myself for ethical reasons. Best of luck.
Olga Haldemann
Olga Haldemann Oct 13, 2021 12:47PM ET
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I am afraid in 6 minutes things will start changing to notmal:)
Barani Krishnan
Barani Krishnan Oct 13, 2021 12:47PM ET
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Olga Haldemann  Anything's possible, unfortunately :)
Mahmod Hoaeini
Mahmod Hoaeini Oct 13, 2021 12:47PM ET
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❤️ ❤️ ❤️
 
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