Could Gold Prices Hit $1600 Before The Next Leg Higher?
Last week, Fed Chair Jerome Powell disappointed the markets by stressing that inflation was not a concern for the central bank, while ignoring questions about rising bond yields.
Powell hinted that near-term inflation is likely to run hot as the economy improves, whilst also maintaining the central banks stance to keep monetary policy ultra-accommodative until its goal of maximum employment is reached.
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Higher yields are starting to sound alarm bells, as this is a very strong indicator that a spike in inflation is just around the corner.
Another key indicator of rising inflation – is higher oil prices.
On Monday, Oil prices surged to their highest levels in 14 months – with U.S Crude Oil topping $65 a barrel and Brent climbing above $71 a barrel.
Oil prices are now up over 264% from the lows seen in April 2020.
The massive upswing in prices shows that Oil is taking Gold’s place as the ultimate hedge against inflation.
While Gold prices remains vulnerable to further weakness in the near-term – it goes without saying that the fundamental backdrop for precious metal remains extremely bullish in the long-term.
As Gold continues to hover below the key psychological level of $1700 an ounce – the big question now, is how much lower can prices go before the next leg higher?
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