Gold has been range bound this week. The precious metal fell yesterday and is rebounding this morning. Looking at technical indicators, gold is looking oversold in the short-term time frame. While a small rebound is likely to be in store, the longer term outlook for gold remains weak. With economic growth and inflation set to accelerate in tandem, the Fed is likely to turn more hawkish, despite the high likelihood of a future Fed Chair that leans towards lower interest rates (Jerome Powell). Later today, the House is set to publish the first draft of the tax bill. If the bill is in line with expectations, gold may fall further as inflation expectations increase. We published our broader thoughts on the upcoming tax bill in a commentary last night.
Looking at technical indicators, gold is starting to look oversold today. After its most recent top above $1,300, gold is now below $1,276.
Following reports that Jerome Powell may be the next US Fed Chair, we are upgrading gold back to neutral in the short-term. Gold is neither overbought nor oversold today and continues to trade within normal conditions. This is based on various technical indicators on the daily chart.
After weakening in the latter half of October, we are downgrading gold to bearish in the medium-term. As Trump makes progress on the tax reform bill, expectations for future inflation and rate hikes are rising. Given gold's sensitivity to real interest rates, the precious metals is selling off as a result. While gold was looking overbought earlier in October, the precious metal is now trading within normal conditions. This is based on technical indicators on a weekly chart.