Investors more interested in gold due to rising inflation

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The current development of the global economy, especially in North America and Europe regarding the growth of the year-on-year inflation rate, has turned investors’ attention towards investment gold. After its previous decline in price, gold strengthened again in recent days. On 25 June 2021, at 9:49 am CET, gold traded on the Commodities Exchange Center (COMEX) commodity market at US$ 1,782.30 per troy ounce with a daily growth of +0.32 %.

So far the price of gold keeps strengthening – compared to previous days – which is caused, according to financial strategists and analysts, by increased inflation growth. For example, during the day, investors expect to see a report on current inflation data in the US, where continued growth is expected. Last week the current inflation rate of the eurozone countries exceeded its inflation target of 2 percent year-on-year set by the European Central Bank (ECB), and in other countries, out of the eurozone, the current inflation rate has moved significantly closer to 4 percent.

Gold, once again, is now beginning to fulfill its value preserving function protecting investors against inflation. The rise in the price of gold occurred when the exchange rate of the US dollar (USD), as the main commodity currency, began to decline slightly. On 25 June, according to the US Dollar Currency Index (DXY), the USD was seen at a price level of 91.74, with a daily decrease of -0.08% so far. At the time mentioned, the global currency pair EUR/USD traded on the international foreign exchange market – Forex market at a mutual exchange rate of US$ 1,194 per EUR, with the current daily appreciation of the EUR by +0.08% against the USD.

According to economic correspondents, the state of the global economy has slightly improved, but investors’ concerns regarding excessive inflation are growing, which supports investment in gold. According to analysts, a massive purchase of gold has not occurred yet. However, investors consider gold as a hedge against higher inflation that could follow after stimulus measures, and despite the opening up of the economy, demand for gold in the world remains delayed. “We expect gold prices to trade sideways to up for the day with COMEX Spot gold support at US$ 1,765 and resistance at US$ 1,800 per ounce,” said Tapan Patel, Senior Analyst (Commodities) at HDFC Securities.

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