Gold rises to 6 months high as USD weakens

Gold rises to 6 months high as USD weakens

The price of gold has risen as softer inflationary figures pushed the USD lower. The month/month CPI grew just 0.1% vs 0.3% expected, whilst the year/year figure grew by 7.1% vs 7.3% expected. Core CPI month/month rose by 0.2% vs 0.3%. These figures sent the USD down, which provided a boost to most commodities including Gold with the market becoming more positive about a potential pivot from the Federal Reserve. With the FOMC meeting still to come later this week, and an expected 50 bps increase in the funds rate. However, anything lower or if the Fed releases a particular dovish announcement will further weaken the USD and potentially strengthen the price of Gold.

Technical Analysis

The price of gold has broken out of a considerable consolidation. With recessionary pressure now seemingly trumping inflationary pressure, gold may be back in vogue as a transition of capital from riskier investments into gold pushes the price higher. Trading opportunities for gold may come from both long and short positions due to the overall ranging pattern. Currently, the price has an area of ‘chop’ where the price is neither trending up or down.

On the weekly chart, the price is testing the 50-week moving average which is a great measure of the mean of the price or the long-term average. This also coincides with the centre region of the range, which is at approximately USD $1850 per ounce, indicated by the red line on the daily chart. Looking more closely at the daily chart, the RSI is consolidating and may breakout to the overbought zone before falling back down to a more manageable region. In addition, the 50-day moving average has swung back to in rising position.

The global economic outlook still looks gloomy, particularly in relation to the effects or severity of a potential recession. Therefore, gold may become more attractive to the market as growth continues to slow.