The precious metal is pushing higher. Later last week, Gold challenged $1300 before bouncing lower. The momentum is largely bullish, which underpins global uncertainties. In particular geopolitical uncertainties are strong for the future.
We also believe that inflation is back and will push the commodity prices towards new high. One indicator that we follow, the NY Fed’s UIG inflation is showing consumer prices data growth slightly below 3%. In the same time we see most central banks loading up on Gold, such as the PBoC, Russia and China.
The Fed is very cautious by increasing rates and we maintain that the strategy is to kill the massive debt with inflation which is why we should see gold going higher in the medium-term. $1300 is an easy target. Yet, the dollar may further weaken as following this thinking, the Fed should not raise rates much. The central bank is anyway stuck with its current monetary policy as it cannot raise rates as it would trigger a bond bubble burst. The Fed knows perfectly what they do and the mixed signals they usually send are there to let the time to inflation to develop.
By Yann Quelenn