Gold prices are once again headed lower today. Yesterday, gold sold off sharply thanks to strength in the US dollar. While losses were fairly limited at the outset of the day, the precious metal headed lower after the US dollar made gains later in the day. As we wrote in a recent commentary on the dollar, the currency looks poised to continue making gains this year.
Looking at gold today, the precious metal is primarily selling off due to US dollar strength. Most US Treasury yields are unchanged today. We expect some relief for gold in the short-term, as the US dollar is currently looking overbought. In the longer-term, gold is likely to continue weakening as the US enjoys both high growth and accelerating inflation. Once US growth and inflation start decelerating, gold prices are likely to strengthen alongside falling US Treasury yields. This week's upcoming Federal Reserve event is another risk for gold, as the institution is likely to maintain its forward guidance of three to four rate hikes this year. Our short-term outlook on gold is now bearish, while our medium-term outlook is neutral.
After its most recent top around $1,353, gold is now above $1,310.
As gold weakens, we are now bearish on the precious metal in the medium-term. The precious metal is trading within normal conditions. This is based on technical indicators on a weekly chart.