Gold Prices Hold Steady Amid Rising Inflation Risks

The gold market was relatively stable in July, with prices remaining around $4,027 per ounce. According to Gold.org's analysis, positive momentum factors offset negative risk factors, resulting in no change in gold prices for the month.

In contrast to previous inflationary periods, a second wave of high inflation cannot be ruled out, but it does not necessarily imply a major gold rally on its own. The reaction will depend on how real rates, the US dollar, and growth expectations respond, as well as central bank and Asian investor demand.

The current inflation cycle bears some similarities to the 1970s, with Apollo's analogy of the possibility that inflation arrives in waves gaining attention. However, it's essential to note that unions don't wield the same power they did then, oil matters less, and the Fed has a clearer inflation-fighting mandate.

Despite this, near-term disinflation cannot be ruled out, primarily because the underlying US economy isn't as robust as it was after COVID. Nevertheless, upside inflation risks are stacking up, with some illustrations provided in the accompanying charts.