Gold prices are higher today as both the US dollar and bond yields edge lower. The US dollar index is slightly lower today, while 10-year US Treasury bonds are currently yielding 2.87%. As an alternative to fiat currency, gold prices tend to rise when real interest rates fall. When real rates are high, investors choose bonds instead precious metals (unlike gold, bonds pay a coupon). When real rates fall, gold becomes relatively more attractive to bonds and appreciates as a result. Given our outlook for moderating inflation (which should result in lower nominal rates), gold prices should remain in a bullish trend. The main risk for gold is a rally in the US dollar - for now, the dollar remains in a bearish trend. 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 $1,328.
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.