Gold Price Analysis: XAU/USD’s outlook supported by higher inflation and a weaker USD – ANZ

FXStreet Team FXStreet

The rise in bond yields has been a significant headwind for the yellow metal. However, rising inflation and a weaker USD should see XAU/USD push higher in 2021, strategists at ANZ Bank report.

Key quotes

“Now there is greater clarity around the vaccine rollouts, US fiscal preferences and early 2021 inflation dynamics, we have updated our economic forecasts. We now expect US GDP to rise by 6.0% this year, with headline CPI averaging 2.5%.”

“The rise in inflation should see break-even yields increase even more than the expected rise in nominal bond yields over the course of the year. Combined with further depreciation in the USD, we see gold’s fair value at $2,000/oz in the second half of 2021.”

“In the meantime, we expect gold prices will trade sideways for the next quarter or so as the bond selloff continues and investors play the reflation trade through risky asset classes. But gold’s time in the sun is not over.”

Author

FXStreet Team

FXStreet

EUR/USD pops to yearly highs near 1.1770

EUR/USD rapidly reverses course and hits fresh YTD tops near 1.1780 at the end of the week. The pair’s U-turn comes on the back of the intense sell-off in the Greenback amid the generalised risk-on context.

GBP/USD climbs to four-month tops near 1.3600

GBP/USD is building on its solid weekly advance and is pushing toward the 1.3600 hurdle on Friday, or new four-month peaks. Cable’s strong move higher comes as the Greenback intensifies its decline, while auspicious results on the UK calendar also collaborate with the uptrend.

Gold picks up pace, approaches $5,000

Gold prices keep their uptrend well in place and gear up for an imminent hit to the key $5,000 mark per troy ounce on Friday. The yellow metal’s sharp advance gathers pace amid the increasing weakness in the US Dollar and mixed US Treasury yields across the curve.