- Gold markets have rallied during the session on Tuesday as we have seen CPI numbers in the United States come out at 7.1% year-over-year.
- Even though it was less than anticipated, the reality is that inflation is still extraordinarily high.
- Because of this, the market is probably going to continue to see concerns coming out of the Federal Reserve when it comes to this very problematic economy.
Typically, the US dollar will rise, and gold will fall. However, that does not necessarily have to be the case, especially in recessionary times. Because of this, the initial shot higher by gold was probably the negative correlation between USD and XAU. However, there is the possibility that Jerome Powell will do everything he can to talk down the market, at least from a risk appetite situation. After all, the Federal Reserve worries about inflation, and therefore you must keep in mind that rising asset prices will only cause issues with inflation going ahead.
Market to Continue Seeing Buyers Underneath
In other words, it’s very possible that we could see the Federal Reserve back down the markets overall, but I think that the gold market will continue to see plenty of buyers underneath. The 200-Day EMA sits right around the $1766 level and rising. That’s an area that I think would cause a bit of a short-term floor in the market, and if we can stay above there, I think it’s probably only a matter of time before gold goes much higher. It’s also worth noting that we sold off quite a bit from the highs of the day, so that tells you that we are really starting to focus on the Federal Reserve and have looked beyond the inflation numbers already.
If we were to turn around and break down below the 200-Day EMA, then it’s possible that we could go down to the 50-Day EMA. If we were to break down below that level, it would be very negative for gold, but I cannot help but notice that we have a massive “W pattern” that we have been hanging around for a while, and now it looks like we are going everything we can to break out of it. That doesn’t mean that it must happen any time, just that it suggests that there are plenty of buyers underneath in general.
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