Gold price held steady on Monday, helped by the falling bond yields and crude oil prices. It rose to $4,112, up by 6.35% from its lowest level this month, with investors focusing on the upcoming US consumer inflation report.
Gold Price Is Being Boosted by Falling Oil Prices
Gold held steady as investors reacted to the falling oil prices after Donald Trump failed to launch strikes against Iran during the weekend. In a statement to the media, he said that he was not looking forward to launch those attacks as long as talks were ongoing.
Still, this statement should be taken with a grain of salt as Trump normally makes such announcements before the markets open on Monday. Also, Trump has been concerned about the stock market, which crashed hard on Thursday as investors came to terms with the US election.
Falling oil prices are usually bullish for gold because they raise the possibility of inflation starting to cool. A lower inflation rate reduces the possibility of the Federal Reserve hiking interest rates. Gold tends to do well in periods when the Fed is either cutting rates or when officials are hinting that they will cut.
Gold is also rising as bond yields retreat. The ten-year Treasury yield dropped to 4.85%, while the 30-year fell to 5.25%. Gold tends to perform well when yields fall because lower returns make bonds less appealing relative to a non-yielding asset.
Looking ahead, gold will next react to the upcoming US consumer inflation data, which will be released on Tuesday. Economists expect the report to show that the headline and core inflation softened a bit on a month-on-month basis as gasoline prices dropped.
However, the most likely scenario is that the Fed hikes interest rates in December after last Friday’s nonfarm payrolls (NFP) report.
Gold Price Technical Analysis
Gold chart | Source: TradingView
On the charts, gold has rebounded from this month’s low of $3,872 to the current $4,116. It has already moved above the crucial resistance level of $3,950, its lowest swing in July this year.
The challenge, however, is that gold has stalled below the 50-day Exponential Moving Average (EMA). It needs to move above that average to confirm the bullish outlook.
Another risk is that it formed an inverted cup-and-handle pattern, and the ongoing rebound could be part of the handle section. Therefore, gold may resume the downward trend, and possibly hit the key support level of $3,950.
The post Gold Price Forecast as Crude Oil and US Bond Yields Fall Ahead of Inflation Data appeared first in UK on InvestingCube .
