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Gold price gaining moderately with US dollar under inflation pressure

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Analysis by independent analyst Cheng Daravuth.

Gold price gaining moderately with US dollar under inflation pressure

After dropping to a low of $1,782 per ounce in the Asian session on Wednesday last week, the gold trend has returned to bullish as the US inflation rate and job creation have put the greenback – the safe-haven asset’s price-reversing currency – under pressure.

ING chief international analyst James Knightley said on Tuesday that: “US headline inflation rose 0.3 per cent month-on-month, a touch below the 0.4 per cent consensus, while core rose a very modest 0.1 per cent (consensus 0.3 per cent).

“The year-on-year rates slow to 5.3 per cent from 5.4 per cent for headlines while core slowed to four per cent from 4.3 per cent. A more benign outcome than expected, but inflation pressures are not going to disappear anytime soon.

“Moreover, inflation expectations continue to rise. The Federal Reserve continues to assert that longer term inflation expectations remain well anchored at two per cent.”

Furthermore, poor non-farm payrolls data in August has disappointed after adding only 235,000 jobs – well shy of the expected 720,000 – compared to July’s 943,000.

A stalling of US job creation growth in a largely sturdy recovery predictably helps keep down the value of the American currency, and the Biden administration earlier this month outlined measures to increase Covid vaccination rates, including pushing employers to immunise workers.

“The net closed in further on unvaccinated people last week with President Joe Biden warning that ‘patience is wearing thin’ regarding the unvaccinated, particularly as US Covid cases remain high as the highly infectious Delta variant spreads.

“The share of job postings requiring vaccination has skyrocketed since the US Food and Drug Administration granted full approval to the Pfizer-BioNTech vaccine on August 23, according to jobs site Indeed, showing a growing trend among employers requiring candidates to be fully immunised,” CNBC reported on Tuesday.

Based on these fundamentals, mostly supporting a moderate surge in gold, investors should consider following the trend as the price could reach $1,833 per ounce before the end of this week.

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