By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News, December 13, 2022
Gold prices hit a new high since June at $1836.9 per ounce, before stabilizing at $1825 following the release of lower-than-expected U.S. annual inflation figures at 7.1% in November.
The gold futures benchmark index for February on the New York Comex stood at $1,825.50 an ounce, up $33.20, or nearly 2%. The session’s high of $1,836.90 was the highest for Comex gold since June 27, marking a nearly six-month high.
The yellow metal gained about $200 from the $1,600 level reached in early October.
Prior to this rise, gold prices had returned to a key support point, which led to this morning’s bullish move towards new five-month highs, but at this point, prices are returning below a key resistance level, focusing on today’s close ahead of the December 14 announcement of the US Federal Reserve’s decision on interest rates.
On December 10, over the past 30 days, the price of gold had gained +5.34%, reaching $1,807.40 per troy ounce.
From mid-2022 until now, the precious metal has become inversely correlated with the U.S. dollar. The higher the dollar rose, the more gold fell, and vice versa.
Given that the ECB is behind the Fed, the interest rate differential between the dollar and the euro is likely to narrow, thus supporting the euro and putting pressure on the dollar, pushing investors towards the euro against the dollar. What can derail this movement is any sharp escalation of the Ukrainian conflict or a spillover of geopolitical tensions into other European countries, which is impossible to predict so far in December 2022 – and I sincerely hope that this will not happen.
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The surge in deficit spending during COVID has caused the current inflation. The European Union and the euro area have been strongly affected by the return of inflation since July 2021. Euro area annual inflation stood at 10.6% in October 2022, down from 9.9% in September. A year earlier, the rate was 4.1%. The European Union’s annual inflation rate stood at 11.5% in October 2022, up from 10.9% in September. A year earlier, the rate was 4.4%. Annual inflation in the United States reached 7.1% in November, after 7.7% in October and 8.2% in September.
Companies and households are seeing their purchasing power fall sharply and States remain powerless in the face of the consequences of inflation. The middle class is disappearing in Europe. The purchasing power of paper money decreases every month a little more and the value of safe assets such as gold or silver metal increases. The demand for these precious metals has been increasing every month since 2020.
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© Copyright 2022 – Swann Collins, investor, writer and consultant in international affairs.