Gold ended the day up yesterday and is selling off this morning. This week, the precious metal has been able to maintain levels above $1,290. Later tonight, Jerome Powell (the next Federal Reserve Chair) will answer questions in a confirmation hearing. Based on a report by Reuters, he is expected to maintain the status quo by forecasting gradual rate hikes coupled with a smaller Federal Reserve balance sheet. Any sign of hesitation regarding future inflation will be a positive for gold. Given significant headwinds to the inflation outlook (particularly thanks to the upcoming Senate tax vote), gold is likely to benefit from doubts regarding future inflation. On the other hand, Core PCE figures set to be announced on Thursday is a big risk for the precious metal. If year-over-year Core PCE rises above the current consensus expectation (1.4%), markets may begin pricing in higher future inflation. Core PCE has continuously fallen in rate of change terms since the first quarter of this year.
After its most recent top above $1,300, gold is now above $1,293.
Following a recent selloff in gold above $1,280, we are downgrading the precious metal to neutral in the medium-term. 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.