Gold prices are currently flat. Yesterday, the precious metal fell sharply during European trading hours but made back most its losses later in the day. Beyond a strong dollar, bond yields also moved up sharply yesterday as markets price in higher inflation as a result of recent sanctions on Iran. As we have explained before, Iranian sanctions are likely to drive up crude oil prices, in turn pushing up inflation. Today's economic environment of high growth coupled with accelerating inflation is a clear negative for the precious metal.
Looking at gold today, the precious metal is getting some help from falling US Treasury yields and a flat dollar. While 3% has served as an area of significant resistance for 10-year US Treasury yields, the trend remains bullish and yields are likely to rise in the near future. While yesterday's producer price index figures were below estimates, today's consumer price index numbers are more important for setting inflation expectations. Consensus estimates for April headline inflation are fairly high (2.5%). If today's inflation figures are below estimates, expect more relief for gold. Our short-term and medium-term outlook on gold is bearish.
After its most recent bottom around $1,303, gold is now above $1,313.
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.