Another failure at $1,800, what happened?
(Kitco News) - Gold'strading pattern got many analysts excited this week, with some even saying thathotter-than-expectedinflation data was a game-changerfor gold. But things didn't pan out as expected, with gold tumblingnearly $30 on Friday following a strong retailsales number out of the U.S.
So whathappened?
Goldstarted to rally when the International Monetary Fund trimmed its global growth forecast, citing rising risks from supply chain bottlenecks,price pressures, and threats from the delta variant. The IMF said its 2021global growth forecast is now at 5.9% from the previous estimate of 6%. The2021 growth forecast for the U.S. was slashed from 7% to 6% due to supplyconstraints.
Thelatest data further exacerbated economic growth concerns, showing inflationreturning to 13-year highs. This boosted gold to a weekly high ofabove $1,801 an ounce.
"Thisis a major reversal of trends and very positive for gold," OANDA seniormarket analyst Edward Moya told Kitco News. "We are starting to see themarket growing nervous about the U.S. consumer. Gold is entering a period whererisks now outweigh the reopening trade, and we'll see more safe-haven flowsinto gold."
Bridgewater Associates also warned investors that inflation willnot be transitory, noting that central banks worldwide will bepowerless to contain price surges without hurting the economy.
On top of that, markets digested FederalReserve's September meeting minutes, which revealed that centralbank officials are looking to start reducing their bond-buying stimulus programas soon as mid-November or mid-December, with plans to wrap up in the middle ofnext year.
At theend of the week, it was "massivetechnical resistance" at $1,800 an ounce and strongretail sales that ended up knocking gold down. Analysts told Kitco News that growth concernsneed to rise for gold to break $1,800 an ounce and have a chance atre-test its all-time highs of above $2,000.
But despite Friday'sselloff, bullish sentiment is still out there, especially with geopoliticaltensions flaring up. And the focus is not only gold. James Anderson,CEO and Chairman of Guanajuato Silver Company, told Michelle Makori, LeadAnchor and Editor-In-Chief of Kitco News, that a weak economy, contractingproduction, and strong demand could push the silver priceto $40 by mid-2022
By Anna GolubovaFor Kitco News
Follow annagolubova
agolubova@kitco.comwww.kitco.com