Gold, a beneficiary of low interest rates, may struggle if inflation rises - Citi

Gold, a zero-yielding safe haven, is a beneficiary of the low interest rate environment and the rally in the yellow metal may stall or run out of steam if inflation rises, forcing central banks to lift borrowing costs, Citi’s Ed Morse said, while talking to Bloomberg. 

Analysts at Goldman Sachs also see a potential rise in inflation as a key risk to gold’s price rally. The investment bank said earlier this year that gold would rise to a new record high above $1,920, but may a tough time crossing the psychological hurdle $2,000 if the Fed hikes rates in response to a rise in inflation. 

Gold has rallied by 21.5% so far this year, The metal picked up a strong bid at lows near $1,450 in mid-March after the U.S. Federal Reserve and other major central banks launched unprecedented liquidity-boosting programs to stabilize markets and help the global economy absorb shocks arising from the coronavirus outbreak.