Gold might take a look at new highs once more this 12 months, in response to David Lennox of Fats Prophets, who mentioned he sees “a reasonably large tick” forward for costs of the dear metallic.

Gold costs have been blended in up to now this 12 months. Because the begin of 2021, spot gold has gained about 0.66% — clawing again some features after a March stumble that noticed costs drop beneath $1,700 per ounce. It’s at present buying and selling at round $1,911 an oz..

Inflation within the U.S. continues to be very a lot within the highlight because the central financial institution has been protecting the monetary system flushed with money. The Federal Reserve has since final 12 months stored rates of interest low and purchased up Treasurys, in a bid to stimulate the Covid-hit economic system and maintain monetary markets afloat.

Chatting with CNBC’s “Squawk Field Asia” on Monday, the sources analyst pointed to current U.S. inflation information that confirmed costs have been rising because the core private consumption expenditure index for April got here in faster-than-expected on Friday. The measure is taken into account by central financial institution officers as the most effective gauge of inflation.

Greater readings of inflation are set to be a “boon” for gold, a bodily asset, Lennox mentioned.

“Inflation’s coming again as a result of we have seen such a big surge in U.S. cash provide,” he defined. “Each time we have seen that surge previously, it has been accompanied — most likely 5 of six months later — by larger inflation.”

Relying on one’s funding time horizon, there are two methods to take part within the anticipated gold rally forward, Lennox recommended.

“At this stage, we would counsel that if we do see a strong surge within the gold worth, then you could possibly search for a gold ETF the place you do get that one-on-one worth motion — after all minus any administration price,” he mentioned. “That does offer you superb publicity.”

For these investing for the longer-term, nevertheless, Lennox mentioned they need to take into account publicity to gold miners as a substitute.

“(The miners) have the capability to develop their manufacturing sooner or later and so they additionally pay dividends, so that you get just a little bit again,” he mentioned.

In the meantime, the greenback can also be anticipated to weaken, and might be one other potential tailwind for gold — thought of a protected funding asset in occasions of market uncertainty.

“We have rising debt, we have extra bodily cash inside … the U.S. greenback pool,” Lennox mentioned. “These two components in themselves would counsel that we will see a weaker U.S. greenback going ahead.”

Moreover, the economies of main currencies that commerce towards the U.S. greenback are in some cases doing higher than the U.S., he mentioned with out elaborating.

“We predict there’s additional (greenback weak spot) to go and that is going to be an excellent tailwind for the gold worth and valuable metals,” mentioned Lennox.

— CNBC’s Jeff Cox contributed to this report.