Gold Extends Gains on Growing Inflation Woes

Gold Extends Gains on Growing Inflation Woes


Precious metals prices raced higher as the dollar continued to weaken. The rising inflation expectations pushed investors towards gold and other metals as an inflationary hedge. The steady US yields and soaring inflation expectations drove the real yields south, which supported gold. As long as the Federal Reserve is considering the inflation transitory, and is sticking to the current monetary easing pace, with inflation rising, gold would remain supported. The price of a gold ounce rallied to 1907, moving back to the positive territory for the year for the first time since early January. The price of a silver ounce rose to $28.23, and palladium recovered to $2806.


The dollar index, which measures the greenback against a basket of major currencies, continued to trade below the 90 threshold, on extended prospects of the Federal Reserve sticking to the current policy. The Federal Reserve chairman declared several times that the Fed is not willing to alter monetary policy until substantial progress is made in the labor market, reiterating that inflation is transitory. Market participants are looking forward to the second reading of the first-quarter GDP and the PCE price index later this week.


Futures tied to major US stock indices were mixed in yesterday's session. The tech sector continued to outperform its peers where the Nasdaq index settled higher while Dow Jones and SPX500 were in the red territory. During the Asian session, the three benchmarks moved north with volatility falling. The Dow Jones Industrial Average futures rose to 34398, the S&P500 futures rallied to 4201, and Nasdaq futures hovered near 13717.


The Reserve Bank of New Zealand concluded its monetary policy meeting by keeping policy settings unchanged. The bank reiterated that the monetary stimulus will remain the same until inflation and employment achieve targets. However, the projections indicated that interest rates could be rising in the second half of 2022, which boosted the New Zealand Dollar. The NZDUSD rallied to $0.7316, the highest since late February, and the GBPNZD declined to 1.9348.


Oil prices protected gains earned during the first trading day of the week. The chatters on obstacles surrounding the efforts of reaching a deal between the World's superpowers and Iran supported the prices. In addition, the economic data from the United States, the United Kingdom, and the Euro region are encouraging. The American Petroleum Institute reported a decline in US crude oil stock by 0.439 million barrels. The official figures will be published by the US Energy Information Administration later today. The West Texas Intermediate crude July contract rose to $66.41, and the brent blend July contract advanced to $69.13.

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