26.10.202110:13 Forex Analysis & Reviews: Gold as a strategic inflation hedge

Concerns about rising prices continue to grow worldwide. At the same time, investors' appetite for defensive assets is increasing. Gold has already risen for two sessions in a row.

On Monday, the metal continued the upward trend. As of Friday, the key catalyst for bullion was traders' worries about inflation getting out of control.

Investing in gold is considered one of the best hedges against rising prices. That's why precious metal tends to become more expensive amid rising inflationary fears around the world.

During yesterday's trading session, gold gained 0.6%, or $10.50, allowing it to finally break through the key $1,800 level. At the close of the New York COMEX, gold was trading at $1,806.80. This is the highest level since September 14.

Silver, meanwhile, also showed a positive dynamic. On the first day of the week, it added 0.6% or 14 cents, to close at $24,592.

Experts attribute the current upturn in the precious metals market to the fact that investors prefer to invest in safe assets to protect their portfolios from inflationary pressures. Price rally, which no longer seems to be something temporary and frivolous, is the main topic of the last few days.

Last weekend US Treasury Secretary Janet Yellen assured that America was not losing control of inflation, and that she expected inflation levels to return to normal by the second half of next year.

Experts note that, unlike the past few years, this year's inflationary situation is not driven by consumer demand. Prices are rising because of serious supply chain problems around the world. Some economists expect that they may take years to resolve.

Therefore, not all market participants believe that in the current situation it is possible to control inflation and to make optimistic forecasts regarding a fall its rates. On the contrary, the opposite sentiment now prevails.

Jack Dorsey, founder of Twitter and Square, took to Twitter to warn, "Hyperinflation is going to change everything. It's happening.

His comment provoked another debate among public figures about which assets are the best safe havens in these uncertain times. Thus, economist Peter Schiff mentioned gold and other real assets as the only solution.

He said: "Just don't expect to find any refuge from it in Bitcoin. To protect yourself from hyperinflation you'll need to own real assets. Gold qualifies, but Bitcoin does not."

According to experts, all this talks about inflation are finally starting to support gold, which has so far traded in a narrow price range as it has been limited by expectations about the future course of the Federal Reserve's monetary policy.

Commerzbank commodities analyst Daniel Briesemann noted that gold is being lent buoyancy by the rising inflation expectations. However, every day more and more market participants realize that the current high level of inflation is not temporary. Therefore, gold as a defensive asset will have to benefit from this.