Gold prices soared on Wednesday, gaining a massive $37 (+2%) intraday to $1,796/oz after U.S September CPI data showed that inflation increased 5.4% year-over-year in the U.S – above forecast figures.
U.S Fed meeting minutes for September were also released, which merely confirmed signs for a potential November tapering of the central bank’s ‘emergency’ bond-buying stimulus. Releasing meeting notes is a form of forward guidance used by central banks to try to influence market expectations on future interest rates.
This briefly curtailed gold’s drive upwards, but it has since moved back into positive territory on Thursday for the third successive day – reaching the psychologically important $1,800 mark during intraday trade today.
Gold’s strength coincided with a sell-off in U.S bond rates and the U.S dollar – 10 and 30-year Treasury yields were down 1.5% and 2.5% respectively, and the dollar index (DXY) has come down nearly 1% for the week.
Analysts at TD Securities released a note with a strong bullish case for gold, stating: “Although stagflation has captured share of mind, it has yet to translate into additional gold demand. However, as the global energy crisis intensifies, reasons to own the yellow metal are also growing more compelling. A cold winter could send energy prices astronomically higher, asymmetrically fueling stagflationary winds. This translates into a fat right tail in gold prices.”
Markets will be looking at the economic docket release later today, as gold targets $1,800 and above.
The yellow metal was last seen trading at $1,797/oz.