Today is an ideal day for gold, as both the US dollar and US Treasury yields are currently falling. While both yields and the dollar rose following last week's January FOMC minutes, these trends have reversed today. In a longer commentary on gold, we argued that the limited prospect for accelerating inflation is likely to keep interest rates and the dollar in check. In turn, inflation expectations are likely to fall, supporting gold prices. This week, markets are awaiting Federal Reserve Chair Jerome Powell's first testimony to Congress. There is a risk that Powell will seek to adjust the Fed's path, despite the widespread view that he will seek a continuation of Yellen's policies. Ahead of his testimony, yields and the dollar should trade in a relatively limited range. Our short-term outlook on gold is neutral, while our medium-term outlook remains bullish.
After its most recent top around $1,353, gold is now above $1,340.
As gold runs out of steam, we are downgrading gold to neutral 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.