Gold is finally trading higher today. Yesterday, gold prices were higher at the outset of the day, but gave up most of their gains by the end of the day. As we wrote in our US dollar daily update, traders have been buying the dollar during US trading hours in recent history. As the dollar is now in overbought territory, we expect the currency to continue giving up some of its recent gains.
Looking at gold today, the precious metal is benefiting from weakness in the US dollar. The US dollar index is now trading below where it started trading yesterday. Looking at US Treasury bond yields, the 10-year is currently flat and yielding 2.973%. Yesterday, the Fed signaled its comfort with accelerating inflation (by referring to a "symmetric" two percent inflation target). While the initial reaction to the statement resulted in a lower US dollar, the dollar looks destined to keep strengthening as inflation continues to accelerate. Thanks to high commodity prices (particularly crude oil), the outlook for inflation remains positive. As a result, late-cycle inflation should keep the dollar on a strengthening path (hurting gold as a result). Our short-term and medium-term outlook on gold is bearish.
After its most recent bottom around $1,303, gold is now above $1,309.
As gold prices weaken, we are now bearish 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.
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.