Gold Price Analysis: XAU/USD moves in tandem with US inflation expectations


  • Gold looks to be tracking the US inflation expectations. 
  • The yellow metal has cleared the bearish trendline from August highs. 

Gold is moving in lockstep with the US inflation expectations, which have risen back to highs seen in August. 

The yellow metal is currently trading largely unchanged on the day near $1,927 per ounce, having peaked at a record of $2,075 in August and pulled back to $1,848 on Sept. 24. 

According to data source Federal Reserve Bank of St. Louis, the US 5y5y forward inflation expectation rate was 1.9% on Friday – just short of the August high of 1.91%, having seen a low of 1.71% on Sept. 24.

Indeed, inflation expectations are closing on the Federal Reserve's (Fed) 2% price target. However, the central bank is now targeting an average inflation of 2%. In other words, the bank intends to allow inflation to rise above the 2% target for some time before raising interest rates

As such, the path of least resistance for gold, a proven inflation hedge, is to the higher side. 

The yellow metal has cleared the resistance of the trendline connecting Aug. 7 and Sept. 16 highs. 

The breakout indicates the pullback from the record high of $2,075 has ended, and the broader uptrend has resumed. 

Supporting the bullish case is the resurgence of the coronavirus cases, especially across Europe. However, if virus concerns lead to risk aversion, the US dollar will likely find bids, complicating matters for gold bulls. 

Technical levels

XAU/USD

Overview
Today last price 1927.28
Today Daily Change -2.97
Today Daily Change % -0.15
Today daily open 1930.25
 
Trends
Daily SMA20 1907.07
Daily SMA50 1939.5
Daily SMA100 1862.34
Daily SMA200 1744.38
 
Levels
Previous Daily High 1930.62
Previous Daily Low 1893.72
Previous Weekly High 1930.62
Previous Weekly Low 1873.01
Previous Monthly High 1992.42
Previous Monthly Low 1848.82
Daily Fibonacci 38.2% 1916.52
Daily Fibonacci 61.8% 1907.82
Daily Pivot Point S1 1905.77
Daily Pivot Point S2 1881.3
Daily Pivot Point S3 1868.87
Daily Pivot Point R1 1942.67
Daily Pivot Point R2 1955.1
Daily Pivot Point R3 1979.57

 

 

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