However, the yellow metal has rebounded sharply on worries surrounding rising inflation and is currently trading near $1,900. The government’s rescue spending and an improving job market have been boosting purchasing power, which is driving inflation. In fact, consumer prices in the United States have recently increased the most since 2009. According to Statista, the annual rate of inflation this year is expected to be 2.26%. Furthermore, because the Fed currently views any rise in inflation as temporary, the central bank may not change its easy monetary stance anytime soon.
So, while the recovery by the economy so far has boosted investors’ risk appetite, uncertainties continue to loom over the pace of recovery. As a result, gold’s demand as a safe-haven asset is increasing. Also, with the printing of money picking up pace globally and the Fed expanding its balance sheet, the dollar could weaken further, pushing gold prices higher.