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Low inflation in China opens up an opportunity for a rise in gold prices

11 April 2023 176
Low inflation in China opens up an opportunity for a rise in gold prices

Gold prices rose on Tuesday after falling by over 1% in the previous session. Investors are awaiting the U.S. inflation data to be released on Wednesday. Meanwhile, positive China's inflation figures have already been released.

China's consumer price inflation hit an 18-month low and the plunge in selling prices accelerated in March. Demand remained persistently weak. This strengthened policymakers’ arguments to step up support for the uneven economic recovery. In contrast to rising prices around the world, retail and manufacturing inflation in China remains low as the consumer and industrial sectors try to recover from the pandemic. Consumer inflation could fall short of Beijing's official targets this year. The consumer price index should be about 3% in 2023. 

China's inflation rate is lower than expected. This is favorable for gold. Since the country is one of the leading economies in the world, it will pass on its low inflation to the rest of the world. Thus, global inflation could continue to decline and the further path of key rates could be reversed.

On Tuesday, Newmont Corp. raised its offer to buy Australia's Newcrest Mining Ltd. to Australian $29.4 billion ($19.5 billion). The organization is seeking a deal to strengthen its leadership in gold mining.

The Australian gold company's business includes its first-class Cadia asset in Australia, along with an expanding presence in North America and Papua New Guinea.

The company seems to have faith in the increase in gold prices, as it has raised its bid price.

According to the technical analysis, the gold price has rebounded from the lower boundary of its uptrend. At the same time, the yellow metal continues to trade within the bullish Marubozu candlestick, which was formed on April 4. The fundamental background suggests further rise in price.

The growth target will be the upper boundary of the Maribozu candlestick, which corresponds to the price of $2,020. A Stop-loss is placed at the break of the uptrend and the breakout from the Maribozu candlestick's local low. This is the level of $1,983.

The gold price is likely to rise:

Take profit — 2,020.

Stop-loss — 1,983

This content is for informational purposes only and is not intended to be investing advice.

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