Gold shed all of its initial gains again on Monday. Today, Eurostat will release the preliminary Harmonised Indices of Consumer Prices (HICP) data. High inflation could prompt calls for sharper hikes from the European Central Bank (ECB), weighing on the yellow metal, economists at Commerzbank report.
Headwind for gold
“Gold is facing headwind from the firmer US dollar and significantly rising bond yields.”
“After German inflation surged unexpectedly steeply to 7.9% in May, the EU-wide rate of inflation is also likely to have risen further. In this environment, gold should really be in demand as a store of value. However, such a high inflation rate could also reignite the debate about whether the ECB should perhaps increase interest rates more quickly or sharply.”
“Calls for a 50 basis point hike at the meeting in July could become louder, in which case gold might come under pressure.”
See – Eurozone HICP Preview: Forecasts from five major banks, inflation to hit new record