After making its most recent bottom at $1,268 last Thursday, gold has been sharply rebounding. On Friday, gold strengthened following weak non-farm payroll figures and rumors regarding another North Korean missile test. Over the weekend, Trump tweeted the fact that talking to North Korea "hasn't worked" in the past, suggesting that "only one thing will work". While his intentions are unclear, rising political tensions can strengthen gold prices in the short-term. Given that the precious metal is strengthening in spite of rising bond yields, gold may be sending an important signal regarding future inflation. We recently covered our longer term outlook for gold given potential changes in inflation in a recent thought piece.
After almost breaching oversold conditions last week, gold is currently trading within normal conditions based on technical indicators on a daily chart. After its most recent bottom close to $1,270, gold is now above $1,279.
Gold was a big mover on October 6, and enjoyed a good rebound after weakening for most of the previous week. As such, we are back to neutral in our short-term outlook. We previously warned that the precious metal was falling into oversold territory. The precious metal has since re-entered normal trading conditions, based on various technical indicators on the daily chart.
Looking at the medium term picture, we remain bearish on gold. 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.