Gold Price Analysis: Bears back in play on Fed's Powell, eyeing $1,698


  • Gold is on the way to test the bull's commitments at the $1,700 level on Powell.
  • US yields and dollar get a boost from a lack of guidance on inflation for the bond market. 

The price of gold is soaking up the so far benign comments from the Federal Reserve's chair, Jerome Powell who is being interviewed by the Wall Street Journals chief economic correspondent in a live webinar.

At the time of writing, gold is down on the day by some -0.4% at the time of writing, reading around $1,700.

Markets are looking for guidance from Powell considering the risks associated with helicopter money from the government and the Fed's lower for longer tactic in seeking to achieve their sustainable 2% inflation target and maximum employment objective. 

He said that the Fed will be patient in the event that inflation runs moderately above 2% considering how long inflation has been so low. 

When questioned about the recent rally in rates, Powell said the bond market volatility has caught his attention but he said it is ‘not appropriate’ to isolate one interest rate or price and transient inflation will not affect inflation over the long run. 

As it is clear that Powell is not going to change the script, the bond market is falling and US yields are rising with a bid in the US dollar, weighing on gold prices. 

 ''This regime doesn't bode well for investment flows into gold,'' analysts at TD Securities have argued.

''But the silver lining is that the long gold trade doesn't look all that crowded anymore.''

Looking to Comex positioning, there is ample dry-powder and gold will likely act as a store of value in risk-off ebbs and flows between now and then next milestone on the global economic recovery. 

Gold technical analysis

As per the prior analysis, Gold Price Analysis: Bears looking to test bull's commitments at $1,698, the psychological level at 1700 could come under pressure following this event. 

This brings in two key targets into scope, $1,698 and $1,685. Please see the link above for the thesis behind the two levels.

 

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