Gold is trading flat today after weakening last Friday. In general, the precious metal remains weak thanks to rising growth and inflation. Recent US economic data (such as ISM non-manufacturing PMIs and Markit Composite PMIs) suggest strong growth while rising crude oil prices are likely to result in accelerating inflation. Despite the appointment of Jerome Powell to the role of Fed Chairman, expectations for future interest rates continue to increase. This is because the Federal Reserve has historically hiked rates following strong growth and inflation data. Looking at technicals on a daily chart, gold is neither oversold nor overbought and continues to trade within a normal range. Our medium-term outlook on gold remains bearish.
After its most recent top above $1,300, gold is now below $1,269.
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.