Gold shows resilient
Gold dipped sharply on Monday. The sell-off was such that gold briefly dropped below $2,660 before buyers came in to support prices. This was an unexpected move, given that gold came within two dollars of hitting $2,700 on Friday afternoon, to trade at its highest level in a month. But, as noted previously, bulls should be reassured by the recent price action. Firstly, Friday’s rally followed a sudden drop following the stronger-than-expected Non-Farm Payroll update which saw bond yields soar, along with the dollar. In similar circumstances, an unexpected data release like that has led to a deep and protracted decline in gold prices. But not this time. The bulls’ resolve was tested again on Monday. But again, the price action since then was very encouraging from a bullish perspective. Gold is closing in on $2,700. But whether it is able to recapture this target this week or not is likely to be determined by today’s CPI update, and subsequent movements in US Treasuries and the greenback. If Headline CPI were to top 3.0% year-on-year, then it’s likely that both the dollar and bond yields will head higher, at least in the short-term. This could be another setback for precious metals, and if so, much will then depend on how investors react thereafter.
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