Gold rallied at the start of the trading session on Thursday, but then pulled back profits to show signs of confusion. The underlying 50-day EMA is poised to offer support, and at this point it is worth paying special attention to the precious metal, as one of the hottest topics right now is inflation. At the moment, technical analysis suggests that gold needs to rally and fill the gap, which means a move to the $ 1,860 level. However, if the US dollar continues to strengthen, it will have an adverse effect on the gold metal.
If the price of gold plunges below the 200-day EMA, it will head towards its recent low at $ 1,750. Previously, this area was both support and resistance, so this region will attract some attention from players. On further drawdown, the precious metal will head towards a double bottom pattern at the $ 1.680 line, which will likely be difficult to break down. If this happens, gold will quickly fall towards the $ 1,500 zone.
Volatility, meanwhile, will remain high and care must be taken when sizing positions. According to Christopher Lewis s expectations, the precious metal is on the cusp of a major move.
As Gary Wagner noted, after a sharp increase of $ 18 dollars, gold futures added another $ 5.30.
The market continues to digest the rise in inflation reflected in the CPI data. Another important factor was the speech of the chairman of the Federal Reserve, Jerome Powell, in Congress. His comments made it clear that the Fed is ready to allow inflation to rise despite the fact that the increase has exceeded the expectations of the central bank.
Over the past two days, the most important takeaway from Powell s speech is that it would be a “mistake” on the part of the central bank to act prematurely to combat inflation, especially given the volatility of the situation. This means that the Federal Reserve will leave its current dovish monetary policy unchanged.
Unless the Fed takes action to curb inflation, gold is likely to continue trading higher. From a technical point of view, the main resistance area that the price of gold has already broken was at the $ 1,826.30 line, which is also the 38.2% Fibonacci retracement level. However, the precious metal closed just above the 200-day EMA, which is currently at $ 1.828.70. Gold will meet significant resistance only in the area of $ 1.838.30, and the main barrier is located at the $ 1.861.50 line, or 23.6% Fibonacci retracement level from the last rally.
All things being equal, it seems that the Fed s reluctance to curb interest rate hikes and its belief that much of the rise in inflation is transitory creates a perfect storm that could spike the price of gold.