Gold up 0.7% to $1,862 on the day
Amid the reaction to the US CPI data yesterday, gold managed a big technical breakout to its highest levels since mid-June as real yields tumbled to fresh record lows. And so far today, gold buyers are building on that as price pushes higher in European trading.
Gold is up 0.7% to $1,862 now after securing a bullish break above key trendline resistance and the July to September highs in the $1,830-34 region yesterday.
From a technical perspective, things are lining up well for buyers to potentially take a run towards the $1,900 level next and retest the May and June highs @ $1,914-16.
That said, the break here comes largely due to the bond market responding quite starkly to the US CPI data. It is one that revolves around the inflation debate and so the upside push here could still be subject to volatility down the road.
However, there are two encouraging signs to the latest breakout. One is that price has been coiled up in a narrow range for many months now, so there is a sense of release as traders bet on the technical break higher. The other is that gold is managing to build on gains even as the dollar has firmed considerably at the same time since yesterday.
I'm not going to argue against the technicals but I'm not all too convinced that this is the breakout that gold buyers are looking for to establish any major trends.
But it could be a start before the December to January seasonal kicks into effect, one that has proven to be a consistent tailwind for the yellow metal over the years.