Cryptocoin. com, the gold price rose on Wednesday after the US dollar depreciated as concerns over rising inflation and supply chain problems increased the appeal of the safe-haven metal. Spot gold was up 0.26% daily at $1,786.16 at the time of writing, while US gold futures for December delivery rose 0.18% to $1,788.2.
According to Rhona O’Connell, we will see a change in the range once the gold price exceeds the key $1,800
The fall of the dollar made gold more attractive to foreign currency holders. Bob Haberkorn, senior market strategist at RJO Futures, commented:
There is a global concern about the supply squeeze and the lack of action by the Federal Reserve. The Fed seems to be behind the ball when it comes to inflation. How will the stocks continue to hit new highs with supply chain and inflation issues? There is a safe flight to gold that will continue for the next few months.
Fed Chairman Christopher Waller said on Tuesday that if inflation continues to rise at its current pace over the next few months, policymakers may need to adopt a “more aggressive policy response” next year. Bullion is often considered an inflation hedge, but reduced stimulus and interest rate increases increase government bond yields, raising the opportunity cost of holding non-yielding bullion.
The pullback of US 10-year benchmark bond yields after hitting a five-month high at the beginning of the session helped gold find support. StoneX analyst Rhona O’Connell says that once gold breaks the key $1,800 level, it will see a change in range, adding that risk is on the upside with India’s Diwali festival and steady demand in China.
“You need to be careful about your position size”
Market analyst Christopher Lewis says that the price of gold rallied slightly during Wednesday’s trading session to head towards the $1,790 level. The analyst states that this is an area that is stuck between the 200-day EMA and the 50-day EMA, therefore he sees some noise as possible. Christopher Lewis continues his analysis as follows:
We also have the downtrend line which is important. The 200-day EMA sitting at $1,795 followed by the obviously crucial $1,800 level. The $1,800 level has a certain psychological significance, so I think a lot of people will pay close attention to this area. If we can climb above the $1,805 level, then something may happen.
At this point in the phase, the argument could also be made that there is a large descending triangle, and therefore another reason to assume that the markets will face bearish pressure. However, the analyst states that a break above the $1,805 level could indicate a complete breakout of the downtrend and allow the market to recover quite significantly, underlining the following, giving some advice to investors:
All things being equal, I guess the only thing you can count on is a lot of noisy behavior in general. That’s why you need to be careful about your position size. However, it still looks like we have a lot of problems waiting to cause serious problems. Note the US Dollar Index, it often has a large negative correlation with the market.