The two main forces are the weakness of the dollar and the data pointing to rising inflation. Both of these factors greatly affect the yields of Treasuries and, in turn, the yields of Treasuries affect the bullish or bearish sentiment of gold. Recently, the US Department of Labor showed that the consumer price index jumped 4.2% in April. It is up 2.6% from the figures revealed in March.

According to The Economist, in an article titled “How to Assess Investors’ Inflation Fears,” they said, “What do investors fear most? In the Bank of America’s long-running survey of fund managers, the tail risk they were most concerned about until recently was the pandemic. In this month’s survey, however, inflation topped the list of concerns. It’s not hard to see why. High inflation, if sustained, would force central banks to act decisively to contain it. This would spell the end of the low interest rates that have supported the prices of a range of seemingly expensive assets, from stocks to bonds to real estate. “

While there is absolutely a resumption of the recession caused by the pandemic around the world albeit at different levels, the data suggesting that inflation is increasing adds a new twist to our economic recovery which may be reflected in the market sentiment for different sectors of financial markets. . Today the Wall Street Journal reported that, “The challenge facing investors was evident this month when new data showed a surprisingly large rise in consumer prices. Rather than rising, a set of assets typically supposed to protect investors against inflation fell after the report. “

The article also mentioned that “This week, investors will have a better look at the inflation picture when the Commerce Department updates the Federal Reserve’s preferred inflation gauge, the Consumer Expenditure Price Index. personal. They will also track the revenues of companies like Dollar General Corp., Costco Wholesale Corp. and Salesforce.com Inc. ”

At 5:34 p.m., the June 2021 Comex contract on the most active gold is set at $ 1,881.60 after taking into account the current net gain of $ 4.90 (+ 0.29%). Two-thirds of the current gains in gold can be directly attributed to the weak dollar. Currently, the dollar index is pegged at 89.825, down 18 points, or -0.20%. The dollar index has been in a definite downtrend since the end of March which is directly correlated with the second low in the price of gold which occurred at the same time. The rise in the price of gold today was also due to the active participation of traders and investors who offered the precious yellow metal on the rise.

Our technical studies indicate that there is strong support for gold between $ 1,849 (the current 200-day moving average fix) and $ 1,851 at the 61.8% Fibonacci retracement. The dataset used for the Fibonacci retracement starts at $ 1952 and ends at $ 1671. Using the same data set, the resistance we are currently seeing occurs at $ 1898, which is the 78% Fibonacci retracement level. Above that is the key psychological level of $ 1900 an ounce.

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Wishing you, as always, good trading and good health,

Gary Wagner