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Gold loses strength as an inflation hedge

Joseph Lyttleton, August 29, 2022August 29, 2022

We all know that Gold always flourishes in times of crisis. It continues to be the investment asset par excellence throughout the world, despite the weakness and, above all, the laterality that it has displayed throughout 2022. No one overshadows it in capitalization, with 11.33 trillions of dollars of value of their investments in the market gold ira. Despite this, let’s not forget that it is barely separated by 16% of its historical maximums harvested in August of last year, at 2,067 dollars.

In fact, the omicron crisis unleashed in the markets on November 26 has only achieved a slight improvement in the price of gold, although it has not managed to maintain the level of 1,800 dollars, which is the fundamental resistance, which has not hold while it returns to the lowest of the last month, after touching 1,850 dollars per ounce on November 15.

And all this without Bitcoin, the “other gold” that had been unleashed since the arrival of Covid-19 with the new inflation protection, standing out against falling equities. The truth is that experts consider that gold is the great refuge against inflation by investors when it is high, they say from TD Securities, but also when it tends to slow down over time. The persistence over time of very high CPI levels, which causes sustained price increases over time.

To this we can add the statements of Jerome Powell, the president of the FED, who leaves aside the word transience to talk about inflation. All this with the economy in suspense, but at the moment only with a slowdown and not with a fall, they are not leading to an improvement in the price of gold.

In its share price graph we can see that this laterality that we are talking about, and which it has shown in recent times, remains almost perennial throughout the year. Without changes in its price in the last week, with cuts of 2.4% in the month and that rise a little more, up to 2.6% if we talk about the previous quarter and so far this year, the falls for gold reach 6.26%.

Despite this, from Invesco, its director of ETFs for Iberia, Latin America and US Offshore, Laure Peyranne highlights, in her latest report on the prospects for gold that it continues to be a possible refuge asset to counteract the effect of inflation “a cushion of security in a portfolio that aims to protect the investor in catastrophic scenarios”.

They point out that “in times of greater volatility, such as during the pandemic, we have seen that gold gives a lot of value and is an asset that can be safe.” He affirms that “the demand for gold, both physically and through financial products, continues to be much higher than the supply, which also helps to push prices up.” From Invesco they emphasize that “demand continues to be significantly higher than supply, despite the narrowing of the differential in the third quarter of the year”.

The premium indicators of Investment Strategies show us that, despite everything, gold, technically speaking, continues to enjoy good financial health. With a total score of 8 out of 10 possible points. Among the negatives we find the long-term declining turnover and the slow total moment, which is negative for the asset.

On the other side, they describe the medium to long-term uptrend, the overall rapid positive momentum, the medium-term volume rising, and both medium- and long-term volatility for gold showing declining for the precious metal.

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