XAU/USD Analysis:
- Inflation continues to boost corporate revenues as consumers are left to pick up the tab
- Gold prices[1] await the magnitude of major central bank responses to inflation
- Gold techs: Identifying conditions for possible directional moves
If you were to analyze gold’s choppy price action over the last three months and compare that to the rapid rise witnessed in July and August of last year, you may be wondering if there really is any credibility to recent inflation fears.
While it is not entirely accurate to compare current gold prices to those during the hard lockdowns of the pandemic, it does however help make the point that gold functions better as a long-term hedge against inflation and doesn’t necessarily track inflation in the short to medium-term. Those expecting gold to rise at a rapid rate, in response to rising inflation expectations, may be in for a long ride.
Inflation Concerns
As major US companies report on their Q3 earnings, the issue of supply chain challenges and expectations of increased input costs is becoming apparent. General Electric CFO Carolina Dybeck Happe mentioned that the company expects significant [inflationary] pressure in 2022. 3M CEO Mike Roman also alluded to passing on higher costs to consumers, admitting that inflation effects have materialized way sooner than anybody thought.
Bitcoin[3] looks to have captured a significant amount of interest due to it being widely viewed as an appreciating, speculative ‘asset’ and hedge against inflation. Trader and hedge fund manager, Paul Tudor Jones recently admitted that he prefers cryptocurrencies to gold as an inflation hedge. Bitcoin has risen way beyond that of gold this year, explaining why so many have opted for the switch to the less traditional asset class.
