Gold prices continue to rise as investors flock to the safe-haven metal in response to elevated recession fears, especially in the times of the U.S. midterm elections.
Gold prices are rising as investors take advantage of the positive sentiment in the market, with a price pushing back above $1,700 an ounce, which is indeed the highest index for the month – 2.3% up. Silver surpasses gold as it sees a strong move above $21.50 an ounce – 3.69% up to date.
Reasons Behind the Price Rise
Ole Hansen, head of the commodity strategy at Saxo Bank, believes that gold’s recent break above $1,680 is creating new impetus for the precious metal, also mentioning the breakdown in the crypto markets increasing gold’s appeal as a haven investment.
According to the trade data from the Commodity Futures Trading Commissions, some analysts believe that traders who sold stocks on Friday because they thought the market would decline re-entered the market on Tuesday to profit from the rally. However, other analysts believe that the current stock market rally is simply a reflection of the shift in global market expectations.
CPI & Inflation Roles
The inverted yield curve is a recession indicator that many economists and market analysts rely on. It is still at its widest level in 40 years. Currently, markets anticipate that the U.S. Consumer Price Index will rise by 7.9%. Anything below that will be considered a “yes” for the gold price. The current inflation numbers shift the expectations of many market participants. This influences the Federal Reserve’s perspective on its upcoming monetary policy decision in December.
Many analysts consider the gold market to be in a downtrend, as prices have not yet recovered to their previous peaks and currently rest in somewhat neutral territory. They suggest that gold prices need at least $1,735 an ounce to sustain their effective recovery. Some even advise investors not to get too excited about the market, as the Federal Reserve maintains an aggressive monetary policy. While market expectations are continuously changing, it is important to know that they change according to inflation temperatures, so keep your fingers crossed it does not get hotter than predicted.
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