After strengthening yesterday, gold is taking a breather this morning. Over the past week, the precious metal has been benefiting from weakness in the US dollar. As the outlook for US inflation remains poor, expectations for future Fed rate hikes are likely to be limited. As such, the dollar is likely to remain weak while gold prices are more likely to rise. Historically, the Federal Reserve has failed to tighten monetary policy when inflation is on a decelerating trend. Given recent strength in gold, we expect to upgrade our short-term outlook to neutral shortly.
After its most recent bottom around $1,240, gold is now above $1,265.