Inflation Worries and Signing of $1.2B U.S. Infrastructure Bill Finally Awakened Precious Metals Prices

Most precious metals continue their upward movements following last week’s inflation report from the U.S., as well as signing of a potentially pro-inflationary $1.2 billion infrastructure bill by U.S. president Joe Biden. The rally in gold picked up after a break above the triple top at $1,833/oz.

The U.S. Bureau of Labor Statistics said that the country's annual inflation jumped to 6.2%, marking the biggest annual increase since 1990.

The infrastructure bill, which includes U.S. state investments for various projects concerning roads, bridges, broadband, water and rail, was approved on a bipartisan basis in both the House and the Senate. Now, U.S. president Biden and Democrats are reportedly pushing to pass legislation to spend an additional $1.75 trillion to expand the social safety net and fight climate change.

Last spring, the $1.9 trillion pandemic relief plan enacted in March, which included $1,400 relief checks for eligible Americans, monthly expansion of child tax credits, and extended unemployment benefits – is believed to have sparked in large part the current inflationary processes in global economy, which are also partly blamed on post-Covid economic reopening and well-covered supply chain bottlenecks.

All in all, spot gold gained 1.6% over the last month to sell for around $1,875 per ounce as of now and silver was up 7.2% to $25.20 per ounce over the same period. Palladium, which was long reluctant in the wake of reduced demand for catalytic converters from automakers, still rallied 8.7% on month to go for $2,175 per ounce and platinum climbed 6.8% to nearly $1,100 per ounce. According to Kitco, commodity analysts at Société Générale noted the existence of potential for a significant rally in gold in Q1 2022. In their latest analysis, they said that “U.S. monetary policy will continue to support prices as inflation pressures rise”. Soc Gen sees gold prices averaging around $1,950 an ounce during the first quarter of next year. The bank’s average price target represents a 4.1% gain from current prices.