Critical level for gold and inflation forecast

Month, gold has grown by almost 60 dollars, exceeding the 200-day moving average and returning to above 1,800 dollars without the participation of American investors.

During the rally, the net outflow from the GLD fund amounted to 15 tons; hedge funds were also inactive. The growth by demand from foreign buyers. The critical level for the gold price may change shortly, as some hedge funds are starting to pay attention to the strength of gold – provided that the precious metal can stay above the $1.800 line.

Will provide a wave of purchases if gold overcomes the $1.837 level (the primary resistance). The inflow to GLD is usually late, and this will only increase the pressure from buyers. Inflation will not be temporary. On October 28, investors’ forecast for inflation reached the highest value since 2012.

The ten-year break-even rate shows what, in investors’ opinion, the level of profitability should over the next decade. Last week, according to the Federal Reserve’s economic data, the rate rose to 2.64.

This rate compares the difference in the yield of standard Treasury bonds and inflation-protected securities (TIPS). These bonds will yield the exact profit if the average annual inflation rate corresponds to the difference between the two securities over a certain period, usually ten years.

The break-even rate rose after the US Department of Labor reported that annual inflation in September was 5.4 percent. Investors expected inflation to fall in the coming months as supply chains recover, businesses replenish stocks of raw materials, and more goods reach consumers.

However, the mood is starting to change due to a sharp jump in energy prices, rents, and housing prices, as well as problems in the labor market, The Wall Street Journal reports. According to Refinitiv, during the first two weeks of this month, TIPS-focused funds received 2.1 billion dollars, the maximum value in two months, compared with an influx of $1.7 billion into taxable bond investment funds.

Federal Reserve officials have begun to acknowledge that inflation has become more robust and stable than expected, and the central bank is likely to raise interest rates next year. However, as Fed Chairman Jerome Powell has repeatedly stated, the central bank does not believe that current inflation will become a long-term factor in the economy.

An increase in interest rates puts pressure on lending, which slows down consumer spending. Spending cuts exert less upward pressure on prices but also constrain economic growth. As expected, disruptions in the supply chain did lead to inflation, which will remain a long-term problem.

Trend forecast Shortages of essential goods and supply chain problems will contribute to high inflation during the spring of next year and at least until mid-2022. As supply problems ease, demand for materials lacking for several months will rise, new fuel for inflation for at least a few months.

The Fed to raise interest rates, and the higher the rates, the worse the economy and stock markets will feel.

And on the eve of the 2024 presidential election, the central bank is likely to cut rates to boost the economy and stock markets to enlist voters’ support.


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