Despite weakness in the US dollar this morning, gold is currently selling off. Looking at US government bonds, rising yields are driving higher real rates, which is negative for the precious metal. As we have written before, gold trades inversely to real interest rates. After peaking below $1,320, gold is no longer looking overbought on a daily chart. Given the pace of strengthening since mid-December, the precious metal was due for a short-term pullback. Now that gold prices have corrected, we expect a longer-term bull market to ensue. Thanks to weak US inflation and strong global GDP growth, the US dollar is likely to remain weak helping gold prices shine. Our short-term outlook on gold remains bullish.
After its most recent bottom around $1,240, gold is now above $1,309.
As gold prices gain on US dollar weakness, we are upgrading gold to bullish in the short-term. Note that gold is looking overbought. This is based on various technical indicators on the daily chart.
Following recent strength in gold, we are upgrading the precious metal to neutral in the medium-term. The precious metal is trading within normal conditions. This is based on technical indicators on a weekly chart.