Gold News

Gold Buying 'may rise' amid inflation expectations

Gold Investment could be boosted after VTB Capital suggested today (May 28th) that the actions of the Federal Reserve are increasing inflation expectations.

The yellow metal is currently holding at above $940 per ounce - regarded by some commentators as a key support level - as weakness in equity markets continues.

In a note quoted by Reuters, VTB Capital, the investment vehicle of VTB Group, one of the largest financial services companies in Russia, claimed that this could be down to the Fed's response to the economic crisis.

"Even the all-mighty Fed cannot stop longer-term yields from rising. The deteriorating financial position of the United States spurs quality concerns while the Fed printing press fuels inflation expectations," it said.

Investors often Buy Gold as a hedge against inflation and this trend could be a major factor in the coming months as the fiscal output to tackle the recession starts to unwind.

Another attraction of gold is using it as an alternative investment due to its inverse relationship with the dollar, which would naturally be devalued in an inflationary environment.

Carsten Fritsch, an analyst at Commerzbank, the second-largest bank in Germany, noted that this connection has re-established itself as risk aversion has gradually faded.

"The correlation between the dollar and gold is pretty strong at the moment," he told Reuters.

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