Gold price is expected to soon "slide", soaring to 1,830 USD

Rising inflation is the best support for gold

World gold prices increased to their highest level in the past 6 weeks. The main reason for the increase in gold prices is due to increased inflationary pressure, 5-year bond interest rates also increased to a highest level in a decade.

However, gold prices unexpectedly fell $30 in just a few minutes after Federal Reserve Chairman Jerome Powell tried to ease the threat of rising inflation.

At an online conference organized by the South African Reserve Bank, despite existing concerns, Mr. Powell reiterated that the US Federal Reserve is on track to reduce monthly bond purchases by the end of 2021 and is expected to end in mid-2022.

However, not all analysts believe Chairman Powell and the US Federal Reserve will be able to address expectations of rising inflation.

Mr. Daniel Pavilonis - senior analyst at brokerage company RJO Futures - said that the increase in yields shows that inflation expectations are becoming uncontrolled. When economic activity begins to slow down, the Fed will have limited tools.

Mr. Wade Guenther - an analyst from financial company Wilshire Phoenix - said that inflation is being driven by consecutive disruptions in the global supply chain. The supply crisis could even last longer than initially expected, meaning inflation will continue to rise.

The Fed cannot do anything to impact the supply chain because this is not inflation driven by consumer demand, he said.

The consumer price index in Canada has increased to its highest level in 13 years. In the UK, inflationary pressures continued to rise and exceeded the Bank of England's target for the second consecutive month.

Gold still faces many competitors

While inflationary pressures continue to support gold prices, analysts note that the precious metal still faces many new competitors, especially the cryptocurrency Bitcoin.

This week, Bitcoin prices have increased to a new record high of over 66,000 USD/BTC. This increase is supported by the launch event of ProShares Bitcoin Strategy ETF, the first exchange-traded fund approved by the US Securities and Exchange Commission to invest in Bitcoin futures contracts.

Ole Hansen, commodity strategist at Saxo Bank, said that the stock market, which is trading near a record high, is also competing strongly for gold. However, he believes that the increase could quickly return to support gold if the precious metal surpasses 1,835 USD/ounce.

In addition to Bitcoin and the stock market, the USD is the third factor. The US Dollar Index has tried to maintain an important support level above 93.50 points in the past time.

Mr. David Madden - market analyst at Equiti Capital financial company - said that the worrying event about gold and the US Dollar next week will be the monetary policy meeting of the European Central Bank ECB.

He added that if ECB President Christine Lagarde gives a dovish tone and reduces the inflation outlook, it could weaken the Euro against the US Dollar, while negatively affecting gold prices.