Higher inflation and rising interest rates which in the US usually does wonders for the US dollar as investors from around the globe chase higher returns but as it turns out this time, it is not the case and safe haven assets like gold are luring cautious investors
CPI numbers out a few days ago from the US showed inflation figures within the US Federal Reserve’s target range of between 2 and 3 percent and with the jobs market also booming, the Fed has a green light to lift interest rates further, maybe by as many as 4 times this year.
So what is going on in the markets at the moment and why is such a scenario at play?
Ever since the CPI numbers were released on Wednesday (and above expectations I may add) the US dollar has lost ground while gold has jumped over $50 and if we look back at previous rate tightening cycles gold has actually suffered.
Below may be the answer to the earlier question,
The US economy has not had to deal with rising inflation in nearly a decade so the reason for the strange events unfolding may be buried in the fact that investors are spooked by prospects of higher inflation, which is completely justified as was shown by the tumble in financial markets over the last 2 weeks which was caused purely by the fear of higher interest rates.
So this time around, it looks as if gold is going to be the safe haven of choice for investors and funds alike as a hedge against inflation which will erode their purchasing power.
Maxwell Gold of ETF Securities believes that the US dollar had already fallen out of favour before this week’s CPI figures and that an overall US dollar will also help gold
"Beyond the inflation factor, we're seeing the dollar remain weaker," he said, "I think that we are structurally in a dollar bear market and I think that it could boost gold prices in this range." He said
Activity of FIBO Group, Ltd. Company is regulated by the Financial Services Commission (FSC), registration number of the licence: SIBA/L/14/1063.
Trading on Forex market implies serious risk including the risk of loss of all the funds invested. Please, take into account that trading on the forex market isn’t suitable for all investors and traders.
Unfortunately the services of the company aren’t provided to residents of Austria, Great Britain, Iraq, North Korea and the USA.
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.