Gold Continues to Shine, Growing Concerns Over Financial Asset Bubble

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Economic macros which include the US CPI index used to gauge rising inflation, were good for gold, and the greenback’s recent weakening amid calls from a US Federal Reserve official for more stimulus sparked gold bulls.

“The sideways price movement over the past few days has led day traders to book profits on [a] increase,” said Chintan Karnani, chief market analyst at Insignia Consultants.

The precious metals market had been relatively bullish due to the rampaging virus, as the pandemic brought economic activities to a halt in many leading economies.

However, recent news of a positive vaccine trial by a major US drugmaker has dulled the luster of the precious metal a bit.

Yet, as cheap money abounds around the world, triggered by the huge stimulus packages of global central banks, it is very likely that the world will face a wave of asset bubbles in certain financial assets coupled with a price inflation on major fiat currencies.

Even if the global economy returns to pre-COVID-19 pandemic levels and all economic systems normalize, with the help of a COVID-19 vaccine, it would be very difficult for economic players to deflate the massive global stimulus that is making its way to all liquid financial assets.

Additionally, the medium to long-term outlook for gold looks optimistic for gold, on top of the large-scale stimulus measures already injected into the global economy coupled with the US Federal Reserve leaving the rate of interest at zero in the short to medium term, it becomes very difficult not to see a tsunami of asset price inflation on many global financial assets.

For an overview of all of today’s economic events, check out our economic calendar.

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