Mon, Nov 29, 2021 @ 12:15 GMT
HomeContributorsTechnical AnalysisGold: Can It Break $1830 On Inflation Fears?

Gold: Can It Break $1830 On Inflation Fears?

Signs of inflation abound for the global economy, from the anecdotal (Twitter CEO Jack Dorsey proclaiming that “Hyperinflation…[is] happening”) to the tangible (the Bank of Canada unexpectedly winding down its QE program and dramatically raising its inflation expectations for next year – see my colleague Joe Perry’s BOC recap report for more).

Unfortunately for those who are bullish on the gold, the textbook “inflation hedge”, the recent data and interest in rising inflation has done little to boost the yellow metal, which continues to consolidate in its well-trodden 4-month range between $1725 and $1830. Despite inflation running at its highest level in decades in many major economies, gold is trading lower over the past year and unchanged over the last 15 months.

Don’t tell that to our traders though: Among traders with an open position on gold, a comically lopsided 91% of StoneX retail volume is long the precious metal, up from less than 70% at this time last week.

From a technical perspective, gold has been rising in a short-term bullish channel since bottoming near $1725 support in late September, though it remains flat on the week so far:

Moving forward, there is potential for some short-term strength toward the strong resistance level at $1830 as long as that bullish channel remains intact, but traders would need to see a break above that level, ideally coinciding with a change in the narrative around the precious metal, to flip the medium-term outlook in favor of the bulls.

Meanwhile, given the strongly bullish sentiment toward gold, a break of bullish channel support near $1780 could lead to a rapid drop back to the lower $1700s as traders abandon accumulated long positions en masse.
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Featured Analysis

Learn Forex Trading