gold prices
The price of gold did not reflect the rise in prices of goods and services in the United States. Inflation in the last two months has grown at a pace not seen since three decades ago. However, the gold price, the traditional hedge against inflation, did not reflect it.
Instead, the price of gold corrected from $1,920 to $1,840, bounced from support recently. It appears that a horizontal range forms, with both bulls and bears looking for a close above, respectively below resistance or support.
The Fed is in a tough position tomorrow. On the one hand, higher inflation calls for the tapering of asset purchases, as the Fed has a mandate that focuses on inflation, too, besides job creation. On the other hand, the unemployment rate does not warrant a change in the monetary policy stance. Regardless of what the Fed does, the market’s volatility will increase and the general dollar move will influence the price of gold too.
The technical picture reveals a horizontal consolidation for the price of gold. Bulls may want to wait for a close above $1,910 before going long with a stop at the lower edge of the horizontal channel and a risk-reward ratio bigger than 1:2. On the other hand, bears may want to do the opposite and sell on a break and close below $1,840, following a similar strategy.
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