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Goldman: Hedging Against Inflation 'Best Done' Through Commodities

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Commodities are “still the best hedge against rising inflation risks,” says Goldman Sachs. In a research note, analyst point out that whereas inflation risks had been subdued during the recovery from the financial crisis, market participants are increasingly starting to worry about “overheating” due to economic growth and increasing labor-market tightness. “In summary, while central-bank inflation targeting has certainly helped to lower overall inflation volatility, there remains one key cause of inflation volatility -- commodity prices, and more specifically, energy prices,” Goldman says. “Hedging this risk is best done by investing into the commodities themselves.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

RBC’s Gero: Gold Remains Strong After FOMC Meeting

Thursday March 22, 2018 09:27

Gold has retained its muscular tone due to “expected” short covering and bargain hunting in the aftermath of a Federal Open Market Committee meeting Wednesday, says George Gero, managing director with RBC Wealth Management. Policymakers hiked interest rates 25 basis points, as expected, but continued to signal only two more hikes this year, rather than the three that many market participants feared, analysts say. “Gold rally continues after Fed notes and BOE [Bank of England] leaving rates unchanged,” Gero says. He adds that Fed rate hikes “were priced in and are inflationary signs.” As of 9:12 a.m. EDT, Comex April gold was $8.10 stronger to $1,329.60 an ounce.

By Allen Sykora of Kitco News; asykora@kitco.com

 

FXTM: Softer Post-Fed U.S. Dollar Underpins Gold Prices

Thursday March 22, 2018 09:27

A less-hawkish-than-expected Federal Reserve resulted in a softer U.S. dollar that in turn has underpinned gold, says Lukman Otunuga, research analyst at FXTM. Spot gold Wednesday traded as high as $1,335.80 an ounce, a two-week high, before backing off slightly Thursday and trading at $1,329.20, a loss of $2.65 for the day. “It’s remarkable how gold prices soared on Wednesday despite the Federal Reserve raising interest rates,” Otunuga says. “The reason behind gold’s incredible rebound could be linked to the fact the Federal Reserve was less hawkish than anticipated, which simply weakened the dollar. With the dollar tumbling after the U.S. Federal Reserve disappointed investors, gold found itself back in fashion. The yellow metal could build on the current upside momentum, if political uncertainty in Washington and lingering trade-war fears support the flight to safety.” Technically, gold broke above $1,330 chart resistance, and the metal’s fortunes may hinge on what happens around this level, the analyst says. “Previous resistance at $1,330 could transform into a dynamic support that encourages an incline higher towards $1,340,” Otunuga says. “Alternatively, a failure for bulls to keep above $1,330 could invite a decline back towards $1,314.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

Commerzbank: Gold Continues Rate-Hike Trend

Thursday March 22, 2018 09:27

Gold has continued its normal trading pattern around Federal Reserve meetings, at least based on the last few years, Commerzbank says. Gold fell in the run-up to a meeting that ended Wednesday with a 25-basis-point rate hike that markets had largely factored into prices. This was the sixth rate hike in the current cycle, and the Fed expressed optimism over the U.S. economy, Commerzbank says. Still, officials continued to suggest only three rate hikes this year rather than more, enabling gold to rise. “The fact that further rate hikes are being forecast for the next two years was ignored by the market, however,” Commerzbank says. “In his first press conference, the new Fed Chair Jerome Powell stressed the central bank’s gradual approach, seamlessly following on from the strategy pursued by his predecessor Janet Yellen.” Commerzbank says “the gold price has also shown the same trading pattern this time around is it did before other ‘major’ Fed meetings -- weak before the meeting and then significantly recovered afterwards. The recovery may well continue for a few more days.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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