As the US dollar trades at 3-year lows, gold continues to shine. The precious metal has enjoyed a great week, and has strengthened by more than $50 in the last five trading days. Gold enjoyed the biggest gains when both inflation expectations were rising alongside weakness in the US dollar. Looking forward, we expect the US dollar to keep weakening, but are more doubtful on inflation expectations. Inflation looks set to be weighted down by falling commodity prices and base effects. As inflation was fairly high at this time last year, year-over-year inflation rates are likely to struggle going forward. While the gold bull market looks set to continue, the pace of gains are likely to be more measured going forward. Our short-term outlook on gold remains neutral, while our medium-term outlook remains bullish.
After its most recent bottom around $1,315, gold is now above $1,358.
As gold strengthens, we are upgrading gold to bullish in the short-term. Note that gold is now trading within a normal range. This is based on various technical indicators on the daily chart.
Following recent strength in gold, we are upgrading the precious metal to bullish in the medium-term. The precious metal is trading within normal conditions. This is based on technical indicators on a weekly chart.