Jakarta, CNBC Indonesia – Gold prices are trying again to try the level of US $ 1,900/troy ounce. For now, the price of the yellow metal probably will consolidate first.
On the spot market, the world gold price slightly weakened 0.06% to US$ 1,897.81/troy ounce in Asian morning trading today, Tuesday (8/6/2021). The price of gold had fallen to US $ 1,870 but moved up again.
Launching Kitco News, the fund managers (hedge fund) continues to speculate bullishon the prospect of gold prices. But according to Commodity Futures Trading Commission (CFTC) momentum continues to slow.
CFTC data shows that in the week ending June 1, fund managers increased their speculative long positions (long) contracts on the Comex gold futures market amounted to 3,408 for a total of 147,270 gross long position.
At the same time, short positions taken by big money also increased by 690 contracts to 37,297 contracts. In simple terms, speculators are still placing net long positions on gold contracts as much as 109,973 or up 2.5% compared to the previous week.
Concerns about inflation are still the main trigger for rising gold prices. Recently, Deutsche Bank gave a dire forecast about inflation. According to him, inflation caused by a number of policies and stimulus will only trigger future crises.
This forecast is different from the Fed (US central bank) and other investment banks which predict the increase in inflation will only be temporary. The fierce debate whether inflation is only temporary or persistent continues among market participants and analysts.
However, high inflation and difficult to control will only benefit gold as one of the assets for hedging which is considered safe by investors.
When the Covid-19 pandemic hit, the US central bank The Federal Reserves (The Fed) adopted a loose monetary policy, one of which was quantitative easing (QE) in addition to lowering the benchmark interest rate to inject liquidity in the banking system.
Similar efforts were also taken in 2008 during the global financial crisis due to the shaky property sector in the US. But at that time the QE policy did not have a significant impact on inflation because the conditions were different now.
QE this time is seen as going to increase inflation because it is also accompanied by expansionary fiscal policy and disruption of global supply chains. High inflation is a favorable condition for gold.
When inflation occurs, the value of currencies, especially the US dollar, will be devalued. Prices of goods and services increase and the wealth of economic actors erodes. Gold whose supply tends to be consistently demanded as an asset to hedge against inflation so that the price crawls up.
But persistently high inflation will not be allowed by the Fed. The most powerful central bank in the world will take action so that the world’s largest economy does not overheat. One of them is to suck up the excess liquidity that has been pumped in through a mechanism called tapering.
Tapering indicates that the Fed will regulate the pace of purchases of financial assets. However, the note is that the economy must continue to show improvement so that the Fed can flood the market with government bonds and mortgage asset-backed securities (EBA) that have been purchased.
That’s when the US dollar will strengthen again and gold will weaken. But the question is, before the tapering is done, will gold break back to its all-time high of US$ 2,000?
The golden road to get there is still open. But at least the price of gold still has to test the nearest resistance level at US $ 1,900/troy ounce. If this level is broken again and gold prices consistently rise so that the 50 daily average price (MA50) penetrates the 200 daily average price (MA200), there is a great chance for gold to reach US$ 2,000 again.
CNBC INDONESIA RESEARCH TEAM
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