Posted 11th November 2022

Gold Surges on Inflation Surprise and Weakening Dollar

market analysis gold

Gold is on course for one of its best weeks in recent times after climbing $100 to above $1,760 an ounce on the back of a weakening dollar and a US inflation print that came in below expectations, reducing the need for the Federal Reserve to be as aggressive with future interest rate moves. 

The turnaround in gold’s fortunes is quite remarkable considering just a few days ago, the precious metal looked likely for a period of sideways trading either side of $1,650 an ounce. While clearly the latest inflation figures out of the US are a cause of optimism, the danger remains that the market’s reaction is oversized as the Fed has struck a cautionary note about the need to see inflation consistently track lower. 

Having made such large gains this week, it will be interesting to see gold’s reaction next week and whether the cold realities of a macroeconomic environment in which more interest rate increases are likely on both sides of the Atlantic see gold drop back towards $1,700 an ounce once again.

The final element to throw into the mix is the extent to which gold has benefited from the crisis on the crypto markets. With the collapse in prices across cryptocurrencies, it is likely that investors have instead sought out the traditional haven asset in gold after seeing the dangers of an asset still in its infancy.

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