Gold Prices Jump Following Worrisome U.S. Inflation Report
America's sky-high inflation numbers were up 1.2% over the past month and have investors on edge, leading many to seek shelter in gold.
On April 11th, the Department of Labor reported that the Consumer Price Index (CPI) in March was 8.5% higher than the previous year, the largest year-over-year rise in over 40 years.
Gold (XAUUSD) has typically been the investment vehicle of choice for more conservative investors in times of uncertainty. Thus far, in 2022, that has remained true. Thanks mainly to COVID-19 variants and Russia’s invasion of Ukraine, the volatile start to the year has seen nervous investors flee high-priced tech stocks and other more speculative investments for the safe harbor of gold.
Han Tan, the chief market analyst at wealth management firm Exinity, commented:
“A higher-than-expected headline U.S. CPI print may nudge spot gold closer to the psychologically important $2,000 level, considering bullion’s time-honoured role as an inflation hedge.”
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One factor working against the price of gold is rising interest rates. Higher interest rates mean that bonds carry higher rates, making them more attractive to the same type of investor interested in gold; the 10-year U.S. Treasury yield is hovering around its highest point since 2018. That said, this hasn’t stopped the price of gold from rising. Gold now sits at its highest level since COVID-19 fears peaked in mid-2020.
As we approach the mid-point of 2022, there are a few signs that the volatility in the market will ease. COVID-19 is still causing massive outbreaks in countries worldwide, and Russia seems to be redoubling their efforts to take over Ukraine. Investors should expect gold to remain a popular investment choice for the foreseeable future.
Gold is currently trading at $1,952.87 per ounce, down 1.28% on the day. YTD, the price of Gold is up 8.42%.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
