Gold price is hovering near its highest level in three months ahead of US inflation data. Gold’s selloff is down 10% since 2016. Gold is currently trading at 1,835.68 after recording a three-month surge of 1,842.89 recently.
Gold price outlook
Despite the gold price fallout in the recent past, the prices are poised for a sharp move ahead as the dollar collapses to fresh lows. In April, gold prices edged higher as jewelry markets started to recover.
U.S job numbers heavily weighed on the dollar and brough about low expectations on the interest rates. U.S NFP data shows that the growth of jobs slowed down thus pulling back the dollar. This is making gold less expensive to holders of other currencies.
Gold market analysts speculate that cryptocurrencies such as Bitcoin may be replacing gold as an inflation hedge. The corona virus pandemic hit the gold market hard hence generating low interest rates.
India is among the countries that was largely affected by the pandemic. In 2020, Indian demand for gold was at its lowest. However, as economy normalizes, this has left significant room for increased demand going forward.
Ray of hope?
Despite not posing the expected interests, all is not lost. Gold continues to be on high demand as many governments all over the world strive to recover their economy. On recovery, it is without doubt that gold will be on a robust demand from all over the world.
Edward Moya, senior market analyst at Oanda Corp says:
“Inflationary concerns will dominate the focus this week, but the base effects are widely priced in and this upcoming reading will likely only serve as a baseline. Gold prices seem content consolidating, but the next move still seems like it will be higher.”
I believe that if the U.S labor market continues to make a strong recovery, the gold prices will undoubtedly be on the inflation hedge.
Support levels: $1800 and $1750.
Resistance levels: $1,850 and $1900.