Gold in light of high inflation | Latest news

Written by Joseph Taheria

Dickmill is a market strategist

The world is facing a major economic crisis as a result of unprecedented inflation, and central banks are pursuing tough policies to control these high levels by raising interest rates and lowering the balance sheet. Mostly due to corona infection was in the markets.

Buying yellow metal gold is the most important investment considered against inflation, and many consider gold to be a positive movement with a capital protection and inflation rate.

In fact, tight monetary policies support higher bond yields, which favor the currency. In the United States, for example, the 10-year yield reached nearly 3%, and the US dollar index reached 104, which negatively pressured it to trade near $ 1800 after recording the price of an ounce of gold. Over $ 2070.

Looking at real yields (bond yields after inflation), gold and real income is the right equation, so their relationship will be direct and reflective, so trading real incomes in the negative range indicates the right environment for gold to rise. Recovering real returns and rising above zero is considered negative for gold.

According to Joseph Taheria, the investor seeking gold in an inflationary environment should realize that an increase in inflation rates should be faster than an increase in bond yields.

Raising the price by an ounce of certain factors as a pre-eminence for raising interest rates, and certainly increasing uncertainty in the markets and geopolitical tensions, does not mean that gold should fall throughout the period of policy tightening. .