Gold price on bullish consolidation as inflation jitters persist
- Gold price is on a bullish consolidation pattern ahead of FOMC meeting minutes later in the day.
- Easing of US Treasury yields and weakening of US dollar are the key underlying factors.
- While Fed officials have continued to downplay inflationary pressures, inflation jitters remain.
Gold price is on a bullish consolidation pattern ahead of the FOMC meeting minutes later in the day. The easing of US bond yields and weakening of the US dollar are the key drivers.
US bond yields
With Fed officials downplaying inflation fears, the benchmark 10-year Treasury yields dropped from 1.70 on Thursday to 1.60 on Monday. However, some investors are not convinced with Fed’s position that the expected inflation is transitory. Subsequently, the bond yields have rebounded to the current 1.64. since the beginning of the week, the yields have been moving sideways within the range of 1.62 and 1.65.
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Notably, the bullish consolidation on the part of the 10-year US bond yields is similar to that of gold price. This is an indication that while the Fed officials have managed to calm inflation fears, there are still concerns on the overheating of the US economy in the mid and long-term.
Fed’s position on inflation
Investors are now eyeing the FOMC meeting minutes scheduled for release later in the day. The focus will be on the Federal Reserve’s opinion on rising inflation. After last week’s US CPI numbers heightened inflation fears, several Fed officials have downplayed the inflationary pressures.
On Monday, Dallas Fed President, Robert Kaplan stated that the hiking of interest rates is likely to start before the end of 2022. This is in line with Atlanta Fed’s Raphael Bostic who indicated that the ongoing economic recovery is still uneven.
Gold price technical outlook
On an hourly chart, gold price is on a consolidation pattern ahead of the FOMC meeting minutes later in the day. It has been trading sideways since the beginning of the week. However, it remains above the ascending trendline highlighted in black. Besides, it is trading above the 25 and 50-day exponential moving averages.
I expect gold price to rise to 1872.25, where it may experience some resistance. As it continues to rally, it is likely to find support along the trendline. The bullish outlook will remain for as long as the price remains above the ascending trendline.
On the flip side, a move past the trendline on the downside may place the support level at 1862.33. If that happens, the line will create resistance to the prices.