Gold tests recent highs, while other precious metals extend rally as markets expect less hawkish Fed
Gold is gaining 0.6% during today's session and currently oscillates around recent highs around $1920, while other precious metals are also moving sharply higher. Palladium and platinum both surge over 2%, while silver gains 1%. This is the effect of the weakening dollar and falling yields in the US. Weak US retail sales suggest that interest rate hikes have met their goals of cooling the economy. In addition, the momentum of PPI inflation is clearly declining, which only confirms the fact that the peak of inflation may already be behind us. All this may mean that the Fed may decide to reduce interest rate hikes to 25 basis points in early February.
Gold is testing recent local highs and if current sentiment prevails a break out of the recent consolidation may occur, mainly thanks to a further decline of bond yields. The weakening US economy lowers chances of further aggressive rate hikes, which puts pressure on the dollar. A weaker dollar supports the commodities market and economies with weak currencies. This is the case in China, where the very cheap yuan held back gold purchases by citizens and the central bank last year. Now this situation is changing, which may lead to further price increases. The nearest resistance is located around $1960 per ounce, which coincides with 78.6% retracement. The key psychological resistance at $2,000 an ounce also lies nearby. Source: xStation5
