The Fed may announce its decision on interest rates this week. This prospect seems to have stopped scaring gold. Since Friday, bullion has been showing steady growth.
The precious metal completed the last seven-day period with an increase. This is the first weekly rise in the price of the asset in a month. On Friday, gold gained 0.5%, or $8.10. At the close of the session, it reached more than the weekly high of $1,784.80.
The trigger of growth for the precious metal was Friday's publication of the consumer price index in the United States. As the report showed, the annual inflation last month rose to the highest level in almost 40 years at 6.8% due to a shortage of supply. The increase was 0.8%, while economists had expected 0.7%.
Experts believe that a higher-than-predicted inflation rate may force the Fed to accelerate the reduction of asset purchases and increase interest rates in order to slow down price growth.
"At the same time, too aggressive actions of the regulator aimed at combating inflation may negatively affect economic growth, which will eventually lead to a stock market collapse and support gold," - analyst Jeff Klearman commented on the situation.
For most of the past week, the growth in precious metal prices has been limited by concerns that the Fed may begin a more aggressive normalization of monetary policy. This prospect contributed to the rise of the US dollar. But after Friday's statistics, the US currency turned downwards.
The next surge in consumer prices proved once again that the US central bank is unable to control price growth. Against this background, the US dollar declined by 0.2% to 96.054 points at the end of the seven-day period.
Simultaneously with it, the yield of 10-year US government bonds also dived. The indicator dropped from 1.486% to 1.477%, which increased the investment attractiveness of the yellow asset.
Gold also meets the new trading week in the green zone. At the time of preparation of the material, the price of bullion rose by 0.2% compared to Friday's close and amounted to $1,787.70.
The precious metal is getting more expensive, despite the fact that the Fed may announce a faster reduction in asset purchases in the coming days and, consequently, an earlier start of rate hikes.
Now, most Wall Street investors believe that a tightening of the US central bank's exchange rate does not necessarily mean lower prices for the safe-haven asset.
"I am optimistic about gold in the coming days. The market has already taken into account the intentions of the Fed, and this has affected the value of the precious metal", - said strategist Philip Streble.
He added that the tightening of the Fed's exchange rate will take place in conditions of a significant slowdown in economic growth. Against this background, bond yields and the dollar index will fall. Therefore, he considers gold and silver to be the best assets to invest in at the moment.
Analyst Adrian Day also believes that now is the time to buy precious metals as a hedge against inflation. Price growth in the US has reached its highest level since 1982, while the Fed is seriously lagging behind in the fight against a phenomenon that it did not believe in until recently.
Experts doubt that the American bank will raise interest rates next year, fearing a recession and the subsequent collapse of the stock market. Such sentiments support gold and give it hope for further growth.
According to analyst Darin News, the February gold contract will move this week into the third wave within the 5-wave short-term upward trend. At the same time, the initial resistance level of bullion maybe $1,794.
He said that once gold breaks through this level, the next target will be the level of $ 1,808.
