RadexMarkets Radex: Defensive Properties of Gold Price Amid Rising Inflation Expectations

On March 16, amid the haze of the global macroeconomic environment, the gold market showed strong resilience before the weekend, continuing to fluctuate in an upward range. RadexMarkets believes that the latest consumer confidence data and the rebound in inflation expectations have provided solid support for gold prices. Although current market sentiment appears fragile due to geopolitical fluctuations, the attractiveness of safe-haven assets was further reflected after the data release.

In terms of specific data, the University of Michigan’s preliminary March consumer confidence index was 55.5, slightly above the market expectation of 55, but down from the February final reading of 56.6. RadexMarkets states that consumer confidence has hit its lowest level this year, mainly due to the direct impact of energy price fluctuations. The survey shows that, affected by localized military conflicts, the previously accumulated confidence gains have largely been eroded.

Structural changes in inflation pressures also reflect market concerns. The one-year inflation expectation ended a six-month decline, rising to 3.4%, a figure significantly higher than the pre-pandemic average fluctuation range. Details from the survey indicate that consumers across income levels generally expect their personal financial outlook to worsen, and this expectation of diminished purchasing power has somewhat increased demand for physical gold as a hedge.

Overall, macroeconomic uncertainty is prompting traders to reassess their asset portfolios. With long-term inflation expectations remaining relatively high at 3.2%, pressure on traditional credit assets will persist. Although the transmission of energy prices remains uncertain, gold prices continue to reflect market focus on safe-haven instruments. RadexMarkets believes that until inflation pressures are substantially alleviated, gold will continue to serve as a valuable safe-haven asset.