Goldman: High inflation and Fed will sent gold to new high

For the first time in more than 5 years, Goldman's commodity analysts are of the opinion that gold still has something to show. According to the bank's commodity department, the signs of rising inflation along with market correction and Fed's intentions for higher interest rates have a positive impact on precious metal.

"Based on empirical data for the past six monetary tightening cycles, gold has surpassed interest rates more than four times," analysts added.

Last week the Fed confirmed expectations and raised interest rates to 1.75%, but that was not important, but Jerome Powell's tone. At its first meeting, Powell and other central bankers said they were likely to take bolder steps in terms of raising interest rates.

Goldman predicts four interest increases this year. And while the analysts at the bank admit that optimistic forecasts for gold may seem "opposite," the bank is referring to data from previous tightening cycles as a reason to be optimistic about precious metal prices.

Technical view of gold

Despite the difficulties around the top, the price of precious metal remains on the upside trend. 50 and 200SMA beacons located. We have a flag formation that is activated, but at the moment the local peaks interrupt the upward momentum. DeMarker is in the over-purchase zone, a possible correction signal. 50% Fibonacci correction of the last wave is able to withstand and confirm the upward movement. Sequential counts 5 on top - also positive for the price.

Current levels are risky for entry with long positions, but if a breakthrough of the resistance zone or a correction to levels of about $1330 would allow for very good positioning.

Source: Bloomberg Pro Terminal

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