Gold bugs begin to stir

Gold closed 1.95% higher at $1818 per ounce last week after key central banks' meetings were dovish compared to market expectations.

Gold 1

 

At its meeting, the Federal Reserve announced that tapering would begin this month at a pace of $15 billion per month. However, causing gold bugs to stir, the Fed noted it continued to view inflation as transitory and that it was in no rush to raise rates.

 

A surprise decision by the Bank of England not to raise interest rates and a slower fall in the U.S. unemployment rate sent bond yields tumbling and gold to its highest close in almost two months.

 

Of particular interest to the sustainability of last week's rally in gold, U.S. 10 year real yields (the interest rate adjusted for inflation and a key driver of the gold price) broke below the bottom of a well-established range at -100bp, to close at -111bp.

 

Presuming U.S. CPI data this week does not upend the move in real yields, gold is eyeing critical resistance $1835/40 area coming from three highs between July and September and downtrend resistance from the August 2020 $2075 high.

A sustained break above $1835/40 after the release of the U.S. CPI data would allow a more substantial recovery in gold.

To take advantage of this possibility, we suggest opening longs in gold on a stop enty at $1841, leaving room to add to the position on a daily close above $1841 (limit $1855).

The stop loss should be placed initially at $1820. The first profit target is $1910/15 with scope to $1960.

 

Gold Daily Chart 9th of November

 

Source Tradingview. The figures stated areas of November 9th, 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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