Author: Amar – Technical Analyst

The price of gold appears to be on track to test the January high at $1850 as it stages a five-day rally for the first time since November, and bullion may continue to recoup the losses following the Federal Reserve interest rate decision as the rise in longer-term US Treasury yields does little to derail the recent rally in the precious metal. As a result, further evidence of persistent inflation may keep gold prices afloat even though the ongoing rise in the US CPI puts pressure on the Federal Open Market Committee to adjust its exit strategy, and the central bank may show a greater willingness to normalize monetary policy sooner rather than later as the economy no longer needs sustained high levels of monetary policy support.

As a consequence, major US stock indexes ended sharply lower. The Nasdaq was falling more than 2%, the dollar index (DXY) jumped 0.5% but ended almost flat as currency markets accounted for the macro inflation outlook and started to position into commodity currencies also. AUD/USD rallied to test 0.72 the figure on the notion that commodity prices would climb. However, the bulls have met a wall of supply there and the price is falling below a key 0.7150 level in Asia as the US dollar starts to attract buyers again here in Asia. With that said, expectations for an imminent shift in Fed policy may keep the price of gold within the January range, but the precious metal may continue to retrace the decline from the November high at $1875 if it manages to clear the opening range for 2022.