Inflation starts helping gold

US CPI data for April 2021 was released on May 12. The indicator increased by 0.8% compared to March and by 4.2% year-on-year. This is the largest jump since 2008. The gold rate first dropped to $ 1813, but then partially recovered the lost positions, reaching $ 1825 per ounce. The yellow precious metal is a hedging tool for inflation, so it should come as no surprise that its quotes are increasing as the US currency depreciates.

So, the rise in inflation, which has been talked about so much lately, is finally reflected in a specific statistic. The injection of trillions of dollars into financial markets and the real economy in the form of fiscal and monetary stimulus is starting to take its toll on prices.

Rising inflation could trigger an increase in the Fed's interest rates. Similar considerations of investors and traders led to a decrease in the precious metal quotes after the publication of these indicators. However, Richard Clarida, vice chairman of the Fed, tried to calm the markets by saying that the spike in inflation is temporary and will not require central bank intervention. If, nevertheless, an increase in rates does occur, it will hit the stock markets, increasing the cost of borrowed funds. Correction of stock indices will increase the popularity of the yellow metal as a defensive asset in the eyes of investors. Note that the publication of inflation data led to a correction of the Dow Jones, S&P 500 and NASDAQ indices by more than 2%.

If the inflation rate in the US continues to increase, and the Fed does not tighten its policy, then gold will have a chance to rise in price to the level of last year's record ($ 2067 per ounce) and higher. Therefore, while the precious metal is not too expensive, it's time to secure your financial position by converting some of the paper currencies into the main store of value in history.

South Africa: recovery of production after lockdown

Gold production and sales of this precious metal in South Africa showed significant growth in March 2021. However, we must remember that last year the country was in strict quarantine due to the coronavirus.

It is worth recalling that the mining industry in South Africa was quarantined last year. This means that some fields in the country were either closed or did not work at full capacity. Statistics South Africa (Stats SA) released official data on mining for March this year. It follows from them that in March 2021, an increase in production was recorded compared to March last year.

The extraction of all minerals in South Africa increased by 21.3% in March. Extraction of platinum group metals showed a particularly sharp growth. The growth of this indicator amounted to 68.6% in annual terms.

Gold production in March this year increased by 10.5% compared to March 2020. But sales of the yellow precious metal from South Africa increased even more. The greatest demand was demonstrated by the gold investment coins "Krugerrand", which are popular with investors all over the world. In addition, the South African Rand Refinery produces gold bars for industrial use.

Thus, in March this year, South Africa was able to sell 61.3% more gold than a year earlier. The precious metal sold brought the country 9.74 billion rand, which corresponds to 565 million euros. It is worth saying that Stats SA does not publish exact figures for the extraction of raw materials in the country, but only changes in percentages compared to previous periods.