Gold Tops $1,800 Again amid Inflation Fears, Weaker US Dollar

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Andrew Moran
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Gold futures are soaring to start the trading week, climbing back above $1,800 for the first time in more than a week. The yellow metal has been slumping this year, despite several single sessions of massive gains. Could this be the catalyst to restart the rally, or is this another one-off for the metals market?

March gold futures surged $32.30, or 1.82%, to $1,809.70 per ounce at 16:42 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices are coming off a disappointing 2.3% weekly loss, but the performance on Monday has pared their year-to-date slump to below 5%.

Silver, the sister commodity to gold, is starting to retest its 52-week high. April silver futures soared $0.786, or 2.88%, to $28.04 per ounce. The white metal was relatively flat last week, allowing prices to hold onto their 2021 gains.

Inflation worries are sending the metals market higher, evident by rising Treasury yields. The Federal Reserve has maintained an ultra-accommodative monetary policy that is likely to be sustained for a few more years, triggering currency depreciation and increasing price inflation concerns. The Fed has signaled that it will not tighten policy until the economy has fully rebounded from the coronavirus-induced financial crisis. However, the central bank’s leadership contends that inflation is not on the horizon.

Treasury Secretary Janet Yellen recently pushed for ultra-aggressive fiscal stimulus and relief spending to cushion the economic blows from the COVID-19 public health crisis. Although she says that inflation might be a chief worry for many investors, Yellen believes the cost of doing nothing is far greater. With Democratic control of the House and Senate, President Joe Biden will likely get his $1.9 trillion package approved by lawmakers.

A weakening greenback is also supporting gold prices to start the trading week. The US Dollar Index (DXY), which measures the greenback against a basket of currencies, fell 0.39% to 90.01, from an opening of 90.32. The index slipped 0.4% over the last week, essentially erasing its year-to-date rally. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

In recent weeks, financial analysts have been discussing a “commodities supercycle,” a term to describe years-long gains in the commodities sphere. Aside from natural gas, all the major agriculture, energy, and metal commodities are up. But can gold recapture last year’s record high of nearly $2,100?

But the question remains: Will investors choose gold or bitcoin as a hedge against inflation?

In other metal markets, March copper futures picked up $0.0565, or 1.39%, to $4.1305 per pound. March platinum futures declined $12.10, or 0.92%, to $1,281.20 an ounce. March palladium futures added $17.30, or 0.73%, to $2,385.00 per ounce.

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Published under: Gold