Higher inflation forecasts are driving gold prices

More and more central bankers seem to be withdrawing from the belief that the current inflation is temporary. The new perception of the situation may in turn increase the investment attractiveness of gold, which is gaining in value. On Friday morning, the price of an ounce exceeds 1,8 thousand. dollars.

Federal Reserve, Bank of England, European Central Bank or Bank of Japan - This week the big central banks turned to tightening monetary policy and their forecasts show the picture of inflation, which may persist longer than originally assumed.

The ECB changes the inflation forecast

The Bank of England surprised the market yesterday, raising the main interest rate by 15 basis points to 0,25%, and the ECB declared the end of the pandemic asset purchase program by March 2022.

It seems that the hawkish returns at the Bank of England or the ECB may have contributed to the weakening of the USD, which may also have an impact on the price of gold, which today this morning exceeded 1800 USD per ounce.

The change in the inflation projections for 2022 is quite clearly visible on the example of the European Central Bank. In September this year. ECB experts predicted that next year, the CPI will be 1,7 percent. Yesterday, in turn, they already presented a forecast of 3,2 percent.

The difference appears to be very significant, which may have alarmed investors and focused their attention on gold as a potential hedge against rising prices in the economy.

Falling interest on bonds

It is also worth paying attention to the situation on the bond market. Although the Fed appeared to be hawkish on Wednesday, the yields on US treasury papers started to decline from around 1,66%. up to 1,41%

The fall in bond rates may also be beneficial for gold prices and - interestingly - takes place when the Fed announces the end of the asset purchase program and three interest rate hikes in 2022. This, in turn, may indicate a scenario such as: "buy rumors, sell facts ".