After falling into oversold territory earlier in the week, gold is bouncing back today. Accordingly, we have upgraded our short-term outlook on the precious metal today to neutral - our medium-term outlook remains bearish. Looking at the US dollar, the currency is selling off as the market adjusts its expectations of the next Fed chair. Last week, betting markets had Warsh as the front runner. Given his hawkish views, the dollar rallied on the news. Yesterday, news agencies reported that Jerome Powell is being considered as one of the candidates for the role. Given Powell's calls for lower rates and easier bank regulations, the dollar is likely to weaken if he is selected instead.
Despite Trump's Twitter comments this weekend suggesting that diplomatic talks with North Korea would be of limited use, gold has not strengthened as political tensions rise.
After its most recent peak close to $1,350, gold is now well under $1,300. The precious metal is currently trading below $1,276.
Looking at the medium term picture, we remain bearish on gold in the medium term. Gold is currently correcting, having entered overbought conditions in early September. The recent bout has accelerated following the Federal Reserve's suggestion that future interest rate hikes are likely and Donald Trump's tax plan. Today, prices have re-entered normal trading conditions when looking at various technical indicators, and gold no longer looks overbought.