Gold in the face of inflation and the rise of the dollar
Gold, like any other asset traded on the market, is susceptible to multiple factors. In recent months (perhaps) what has been moving the pulse of investors the most is inflation.
Globally, prices have spiked like not seen in decades: US inflation in June was 9.1%, the highest in 40 years; that of the euro zone was 8.6%, a record since the creation of the euro. And Mexico is not far behind, here inflation reached 7.99%, a maximum in 21 years.
To try to control inflation, central banks have decided to tighten their monetary policy by raising their key rates. This makes money more expensive, discourages consumption and investment, which reduces the demand for goods and services and, therefore, prices tend to fall. The problem? This policy slows economic growth.
With a global economic recession knocking at the door and inflation not giving up, investors have begun to bet on the dollar, also considered a safe haven, which in turn has been driven by an increase in demand for Treasury bonds, because with the rise in rates, these instruments become attractive.
The strengthening of the dollar and the rise in rates is what has hit gold in recent months. For one thing, a stronger dollar makes gold more expensive for holders of other currencies. On the other hand, the rise in the rate of the Federal Reserve of the United States makes gold less attractive, investors are going for Treasury bonds, also safe assets and that, now, are giving better yields.