Gold prices are currently taking a breather. Yesterday, the precious metal surged during US trading hours as riskier assets such as equities and commodities sold off. US Treasury yields also fell (meaning bond prices moved up). While the US dollar tends to strengthen during downturns, the buck failed to move higher in a meaningful way. As a result, gold moved up sharply, serving its purpose as a safe haven during market turbulence.
While the US dollar tends to strengthen during times of distress, it has failed to do so during recent downturns. As we wrote in our US dollar daily update earlier today, one interesting phenomenon is that emerging markets currencies (particularly those of Asian exporters) have been remarkably stable in recent history. If Asian exporters (who hold significant USD reserves) are selling dollars to prop up their own currencies during downturns, this may explain why the dollar has failed to move up. Our short-term outlook and our medium-term outlook on gold is bullish.
After its most recent top around $1,353, gold is now above $1,341.
As gold strengthens, we are now bullish on gold 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.