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Back to November 2021

Gold had a great week, with the price surging mid-week as the Pound hit a 2021 low. The precious metal saw its best week in many months, as investors bought it to hedge against rising inflation.

Is gold’s hot streak set to continue?

USA Reports Inflation Surge

Last week saw the USA report their biggest rise in inflation in over 30 years. The Consumer Price Index for October showed prices rose 6.2% over the last twelve months, the biggest gain since December 1990. Core inflation also experienced a major surge of 4.6%, the fastest gain since 1991. 

The price of fuel, used cars and new vehicles, energy, and food all saw sizeable rises, meaning that the wage increases that workers received were more than wiped out, leaving them falling behind. Shelter costs also increased sharply, giving more cause for concern that inflation could be persistent and not transitory, as was first hoped. President Joe Biden said that reversing the spike in inflation was a ‘top priority’.

Sterling Slumps, Gold Gains

The Pound has had a tough couple of weeks. After the previous week’s decision by the Bank of England not to raise interest rates, The Office for National Statistics (ONS) released figures showing that Gross Domestic Product (GDP) output grew by only 1.3% in Q3 of 2021, much slower than the 5% growth in Q2, with supply issues and staff shortages being blamed for the slowdown. 

The pound reacted rapidly to these figures, hitting a new low for this year of $1.337. As a result, precious metals made major gains. Gold reached £1,394 per ounce on Thursday, a gain of over 3.25% for the week, and Silver reached £18.94 per ounce on Friday, a gain of over 5% for the week.

Gold’s Next Move?

Gold concluded its best week in months on Friday, in tandem with a weaker dollar, weaker pound, and as US inflation hit new highs.

After months of the gold price going nowhere, inflation rates hitting a 30-year high has driven investors back into the arms of gold bullion as they hope it will provide them security and protection.

To judge gold’s next move, we need to look at what’s to come in the week ahead:

This week will see more inflation reports due from further economies, which, if the USA is anything to go by, may provide another positive boost for gold prices.

September’s UK unemployment rate and August employment change figures are due to be released early this week (Tuesday), and October’s USA retail sales will also be reported.

The October UK inflation report is due on Wednesday, which will most definitely have an effect on gold in GBP.

Investors traditionally turn to gold to hedge against inflation, and currently the markets appear worried that the Fed may be behind the curve on inflation. It looks like things may get worse before they get better, and that may well be excellent news for gold.

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.


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