The price of gold is stabilizing this Thursday after jumping to a two-month high of about $1,840 on Wednesday. The ounce of gold jumped 1.5% on Wednesday thanks to the slight decline in the dollar and bond yields, but also thanks to inflation fears, a resurgence of risk aversion on Wall Street, and geopolitical uncertainties between Russia and Ukraine.
The evolution of long rates will remain by far the main catalyst for the gold price in the short term. Currently, down 5 basis points from yesterday's high of 1.90%, the trend in the U.S. 10-year yield could quickly turn bearish again as recent economic data disappoints and the market is already anticipating 4 Fed rate hikes this year.
Economic data would have to come out better than expected or market participants would have to anticipate 5 Fed rate hikes this year to possibly justify further increases in bond yields.
In addition to the movement in long rates, the next catalyst for gold will be the Eurozone inflation figures released on Thursday. The advance estimate was for 5% inflation in December and 2.6% for core inflation. Higher data would support the gold price and vice versa.
From a technical perspective, the outlook for gold prices turned bullish again on Wednesday as it broke above a bearish oblique that passed through the recent highs, but also major resistance at $1834.
(Chart Source: Tradingview 20.01.2022)
Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.
Gold prices could continue to rise until they reach the upper bound of the ascending channel in which they seem to have been oscillating since mid-December, and then eventually reach the November high at $1877.
This bullish outlook would be technically invalidated in the event of a breakout from the bottom of the channel, which would be very likely if long rates continue to rise.
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