I hope you had a good week!
The focus of my last few posts has been around inflation, not surprisingly, and the potential for further volatility in rate-sensitive assets. I highlighted gold as perhaps the most interesting setup earlier this month, but also noted the tug-of-war in the rate of change in inflation versus interest rate expectations. In essence, I concluded that the momentum in real interest rates was likely to be the decisive factor in determining the outcome.
This was emphasised by the weaker-than-expected score of +0.5 provided by our Checklist. Whilst this positive bias favoured owning gold nonetheless, it did however caution against getting too carried away with the bullish narrative.
Here you can see a daily chart with the recent range between $1700-1900 highlighted in orange. Although gold has rallied hard from the low end of this channel from the beginning of the month, the big picture view is still one of a market in consolidation, pending a breakout.
Whilst not quite at $1900 yet, the overbought RSI on the daily chart suggests that this may be an area for longs to potentially take profit if indeed they believe in the +0.5 presented by our Checklist currently. Switching to an hourly interval emphasises just how far gold has come since we first identified the setup at the beginning of the month.
Although it could still run further, the old saying “buy low, sell high” seems to validate taking some profit following an upswing in a range-bound market. If you would like to learn more about our methods, and join me for more analysis in real-time, head to milliondollartraders.com and check out MDT course and Trading Club pages where you can preview everything that we cover.
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Have a great weekend,
Disclaimer: For educational purposes only. Even though we do our best to provide reliable data, you should not trade based on this information.
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