Prominent technical analyst Gary Wagner has said the current rising inflation rates are the main drivers for the recent gold price surge while acknowledging that the precious metal has historically managed to keep up with inflationary pressure.
Speaking to Kitco news, Wagner noted that investors should be on the lookout for the consumer price index (CPI) because gold as a hedge will also surge in value with the projected continued rise in inflation rates.
According to the technical analyst, gold is equipped to preserve wealth in an environment of inflated currency.
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“Inflationary rates because traditionally gold has remained one of the best, if not the best ways to preserve wealth in terms of the fact that if you get an inflated currency, gold will keep up with that, and you’ll have a net power gain meaning that gold will go up as inflation pressures, go up too,” said Wagner.
Weak dollar impacting gold
Furthermore, Wagner noted that the relationship between the dollar and gold is influencing the metal’s value. He stated that the dollar directly correlates with gold and when the currency goes down the metal surges.
Notably, the dollar has been weakening in recent years, an aspect that has accelerated over the past months with the Federal Reserve pumping more money into the economy to tackle the effects of the pandemic. According to Finbold’s previous report, between January 2020 and November 2021, four major central banks expanded their Quantitative Easing programs by a total of $9 trillion to support their economies.
Among the banks, the Federal Reserve and the European Central Banks each accounted for $3.4 trillion during the period. Wagner acknowledged that printing more money results in cheap dollars, putting pressure on the GDP and economy, affecting the prices.
He also highlighted that the national debt’s growth pattern influences gold prices to a minor extent.
Gold price projection
Despite painting a positive outlook for gold, Wagner stressed that the metal is still in the consolidation phase, but a breakout might be near. He believes that if the metal trades above $1,800, it will be in an excellent position to push towards $1,990.
Notably, gold is still attempting to find another all-time high from the August 2020 value that saw the precious metal trade above $2,000.
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