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All-time gold price high in view as US dollar weakens, inflation cools

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(Kitco News) - Cooling inflation data is highlighting a potential peak in U.S. interest rates, which is weighing on the U.S. dollar, and now investors and market analysts are starting to target all-time highs for gold.

Nicky Shiels, head of metals strategy at MKS PAMP, said on Twitter that with Thursday's rally, gold is roughly $30 away from all-time highs.

June gold futures are hovering around fresh 13-month highs, last trading at $2,053.90 an ounce. The rally comes as the U.S. dollar index is trading at a two-month low, testing support below 101 points.

The U.S. dollar is seeing its third day of losses after a significant drop in the U.S. Producer Price Index. The report said wholesale inflation fell 0.5% last month, following February's unchanged reading. In the last 12 months, inflation rose 2.7%.

According to some market analysts, the latest inflation data supports current market expectations that after a 25 basis point hike next month, the Federal Reserve will end its most aggressive tightening cycle in more than 40 years. This cap in interest rates is expected to keep bond yields down, which will continue to weigh on the U.S. dollar.

Currency analysts at Brown Brothers Harriman said that in this environment, the U.S. dollar will continue to struggle.

"The dollar may see some safe-haven bids from time to time, but until U.S. yields recover, the dollar is likely to remain under pressure near-term," said currency analysts said in a note.

At the same time, according to some analysts, there is very little standing in gold's way of new all-time highs.

"Gold remains within an established uptrend on the daily chart. It has broken out of a symmetrical triangle which projects a target just above the all-time highs around $2075, and a recent pullback respected the triangle's upper trendline," said Matthew Simpson, senior market analyst at City Index. "If gold can rally up to $2,075 we doubt it will simply break to a fresh record high, given its historical significance and likelihood that some will want to pocket some profits around the key milestone. But a rise in geopolitical tensions, weak dollar and yields could eventually see the metal yellow reach $2100 and beyond."

Looking at the global currency market, some analysts see very little hope for the U.S. dollar. Along with falling U.S. bond yields, analysts note that a narrowing monetary policy gap between the Federal Reserve and the European Central Bank will support the euro over the greenback.

James Stanley, senior market strategist at, said that the ECB will have to take some aggressive steps to get inflation back down to its 2% target. He added that this stance will continue to support the euro over the U.S. dollar in the near term.

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Can gold hold gains if it hits all-time highs?

Looking at gold, Stanley said that while he thinks gold has room to move to a new all-time higher, he doesn't know if the rally will be sustainable.

"I think we might tag gold at $2,100 an ounce, but I question if it can hold there," he said. "The big question investors have to ask is: who is buying gold at this level?" he said. "Gold has solid momentum, but I don't know if it has enough momentum to hold all-time highs."

Although the U.S. dollar will remain weak, Stanley said he is also not convinced that the Federal Reserve is done raising interest rates. Economic data shows headline inflation is falling; however, both the CPI and PPI data show that core prices, excluding energy and food prices, remain elevated, highlighting the risk that higher inflation has become embedded in the broader economy.

"Gold is looking to bond markets, trying to look around the corner to see if the Fed is done and I don't think it is," he said. "The Federal Reserve has one shot at getting inflation under control and they can't afford to miss it. If core inflation remains high, the Federal Reserve will have to continue to raise interest rates."

Stanley said that gold will see a sustained rally to new all-time highs when the Fed is comfortable that it has inflation under control and starts cutting rates.

"I don't know exactly when that will happen, but when it does, gold will take off," he said.

Christopher Vecchio, head of futures and forex at, said he is bullish on gold in the near term as it has a lot of tailwinds. However, he added that he doesn't want to see gold skyrocket through its all-time highs.

He noted that a weaker dollar, falling real bond yields and global market uncertainty are all potential catalysts that could drive gold to $2,300 an ounce.

"I like gold, but I would look to fade any aggressive breakout," he said. "I think the gold market needs to see a slow and steady climb higher that will create a sustainable rally."

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