Gold will continue to track real yields for the time being
Precious metals got a slight boost from Fed chair Powell yesterday, after he said that the central bank is not looking to ease policy any time soon - not until troubling signs of inflation begin to surface at least, which is a long ways to go.
However, the slight nudge higher hasn't been too significant as gold continues to linger around $1,850 for the most part. From a technical perspective though, at least gold is still keeping above its 200-day moving average (blue line); now @ $1,843.57.
That continues to set a key line in the sand for gold, as a firm breach below that level and the key trendline support @ $1,820 will put pressure on the $1,800 next followed by further support from the 30 November low @ $1,764.80.
Looking at the near-term chart:
Gold buyers are still looking to try and wrestle for some near-term momentum as price action continues to consolidate around $1,830 to $1,860 this week.
There is a slight push above the 100-hour moving average (red line) for now as buyers try to establish a more neutral near-term bias but unless price climbs back above $1,860, any potential upside momentum remains shallow at best for now.
So, what is next for gold?
The US is going to observe a long weekend but expect there to be plenty of focus on bipartisan support (or lack thereof) for Biden moving forward. That will play into the reflation/stimulus narrative and have an impact on yields.
For gold, real yields will be the key spot to watch and in that lieu, as long as the Fed maintains its current stance with Powell reaffirming the Fed put yesterday, then that will continue to remain as a major tailwind for gold moving forward.
As such, gold will likely benefit from the right balance of fiscal stimulus (enough to stir the reflation narrative, but not enough to move the Fed) and the Fed put being in play.
We are already seeing real yields start to retreat back under -1% today post-Powell and a further nudge lower in that direction will underpin gold unless the dollar threatens to post a much stronger correction in the short-term.
