Fed may drive gold higher

Gold may be about to buck the trend this time around by pushing higher in an environment where the Fed is expected to lift interest rates further as the year unfolds.

 Inflation figures released from the US yesterday showed inflation jumping to its highest level in more than 6 years which is bound to keep the US Federal Reserve motivated to tighten monetary policy as the year pans out

The numbers came in at 2.9 percent, which were above analysts’ expectations and higher than last month’s figure of 2.8 percent.

The US economy has not had to deal with rising inflation for more than 10 years and the last time around it caused havoc to the American financial system so investors are poised to be weary this time around and put their money into safe haven assets such as gold in order not to get burnt again.

“Interest rates are going to move higher but real rates will remain low and I think gold will do just fine in that environment,” he said. “I still like gold as an important diversifier as inflation moves higher.” Said Axel Merk, president and chief investment officer of Merk Investments.

The trade tariffs recently introduced by US president Donald Trump are also expected to lend some support to the gold price as investors, wary of the unknown one again seek out safer places for their money and gold is expected to be near the top of the list.

“Although tariffs aren’t good, I don’t see signs that this economy is going to tip into a recession any time soon. I think this economy is going to overheat,” he said. “An important issue though is that people don’t know what is going to happen and they don’t know how to invest in the long-term.” Mr Merk added.

The above review is not a direct call for action, and only advisory in nature.