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Gold could test new highs in inflation, analysts say

Gold could hit a new high this year, according to David Lennox of Fat Prophets.

Gold prices have fluctuated so far this year. Since the start in 2021 Spot gold After prices fell below $ 1,700 an ounce in March, they regained some gains. It currently trades at around $ 1,911 per ounce.

Inflation in the United States It is still in the spotlight as central banks continue to flush their financial systems in cash. Since last year, the Federal Reserve Board (FRB) has maintained low interest rates and bought US Treasuries to stimulate the economy hit by the new coronavirus infection and lift financial markets.

Talking to CNBC’s Squawk Box Asia on Monday, resource analysts pointed to recent US inflation data showing that prices are rising as a core. April consumer spending index entered earlier than expected on FridayThis measurement is considered by central bank officials to be the best measure of inflation.

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According to Lennox, rising inflation will be a “boom” for gold, a physical asset, Lennox said.

“Inflation is back because of the significant increase in the US money supply,” he explained. “Whenever we saw such a surge in the past, it was probably accompanied by a rise in inflation after six to five months.”

Gold playbook

Lennox suggested that there are two ways to participate in the expected Gold Rally, depending on the timeline of your investment.

“At this stage, if you see a surge in gold prices, it’s a good idea to look for gold ETFs that offer one-on-one price fluctuations,” he said. “It gives you a very good exposure.”

However, if you want to invest in the long run, you should consider exposing to gold miners instead, Lennox said.

“[The miner]has the ability to expand production in the future and pays dividends, so I’ll be back a bit,” he said.

Is the dollar weak first?

Meanwhile, the dollar is also expected to fall, which could be another potential tailwind for gold, which is considered a safe investment asset in times of market uncertainty.

“I’m getting more debt and I have physical money inside … a pool of US dollars,” Lennox said. “These two factors themselves suggest that the US dollar will continue to depreciate in the future,” he said.

In addition, the economy of the major currencies traded against the US dollar is in some cases better than the United States, he said without elaboration.

“We think there will be more (dollar depreciation) in the future, which will be a very good tailwind for gold prices and precious metals,” Lennox said.

— CNBC’s Jeff Cox contributed to this report.

Gold could test new highs in inflation, analysts say

Source link Gold could test new highs in inflation, analysts say

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