Gold prices are currently rising. Yesterday, the precious metal made big gains as the US dollar fell sharply following weaker-than-expected core inflation figures. For the past week, we have warned that the US dollar was looking overbought, meaning that gold prices were due for some relief. Following recent losses, the US dollar is no longer looking overbought.
Looking at gold today, the precious metal is benefiting as both the US dollar and US Treasury yields continue to fall. 10-year US Treasuries failed to rise above 3% and are currently yielding 2.95%. The US dollar is also slightly weaker. While this has been a tough quarter for gold, the economic backdrop is likely to improve in the future. As we wrote in our US dollar daily update, inflation is likely to keep accelerating, but the outlook for US growth is less benign. This is because US growth is increasingly likely to be weighed down by both base effects and slowing global growth later this year. Once US growth data starts deteriorating, the Federal Reserve is unlikely to keep signaling a fast pace of rate hikes going forward. Once the threat from the Fed ultimately recedes, gold prices should enter a bullish trend and move higher. Thanks to recent gains, we will upgrade our short-term and medium-term outlook on gold to neutral later today.
After its most recent bottom around $1,303, gold is now above $1,323.