Inflation Fears Stoke Gold Prices


Gold in favour as inflation stirs. As the decade-long Federal Reserve policy of quantitative easing comes to an end, investors and traders are eyeing gold as a hedge to protect portfolios from the eroding effects of inflation.

The precious metal is traditionally seen as a safe haven in times of turmoil, with the recent fall of the stock market in early February pointing to unrest on the street as more frequent interest rate rises look likely in 2018.

Wages Figures Prompt Sell-off

Rising wages also have investors on edge, January Labor Department figures showed wage growth picking up in the final quarter of 2017, posting gains of 2.6% for the year. This was the data that sparked January’s equity sell-off, providing a much-needed boost for treasuries and gold in the process.

Was it just a correction, will gold prices fall again when normal market activity resumes? Not necessarily, the Fed has reason to go steady with rate increases, it can’t just pile them on in one go. This should work to gold’s advantage in the short term, providing a steady boost for the commodity over the next 12 months.

This year also sees key Midterm elections which could provide yet more turmoil for equity markets. CFRA Analyst Lindsey Bell says: “We see gold as a smart and defensive way to diversify a portfolio in the later innings of a bull market and ahead of what has historically been a volatile year as midterm elections approach.”

Live Price Chart – Gold

Volatility Opens Day Trading Doors

Volatility in gold markets has been picking up since December, with daily ranges increasing substantially as inflationary fears bite. While volatility is a nightmare for traditional investors it presents an opportunity for day traders to make a profit. While the headwinds currently facing the market don’t look like disappearing anytime soon the trend looks set to continue.

With gold futures still 26% down on their peak in 2011, there is still a long way for the precious metal to go. With the uptrend set to continue for the long term, this presents an opportunity for day traders who may want to look at taking long gold positions on every pull back to profit from the rebound.

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