Golds rebound despite CPI beat is impressive

There was an interesting reaction to the US CPI report earlier, which came out stronger than expected as food prices soared the most in 40 years. The dollar initially rallied but then slumped, while stocks did the opposite, suggesting that investors are attempting to find out whether the Fed’s rate hikes are now priced in. Interestingly, too, gold was able to hold its own well despite the stronger-than-expected CPI print and the latest rise in bond yields.

So, has gold bottomed out, or this another false hope for the bulls?

We all know why gold has been struggling recently: (1) Strong dollar, (2) rising bond yields (making this non-interest-bearing commodity less appealing for yield seekers) and (3) it costs money to store the metal.

But prices have now gotten quite “cheap” sub $1850 an announce. Gold is appearing more attractive at these levels again, especially when you consider the recent crypto carnage, falling purchasing power of fiat currencies amid rising levels of inflation and the ongoing stock market volatility.

In fact, when you measure gold against some of the other currencies, it hasn’t done too badly. At last check a couple of days ago, the price of gold in euros was up around 10% year-to-date and even higher in pound (+11%) and yen (+16%) terms. Even against the dollar, it is still hanging in the positive territory year-to-date. So, the fact that it has been able to withstand the dollar’s impressive rally to some degree, goes to show that there must be at least some demand for gold from those seeking to protect their wealth being eroded by inflation and from holding fiat currencies.

For this reason, I remain cautiously optimistic on the long-term outlook for the precious metal. With the US dollar now apparently fatigued, it is possible that the precious metal could stage a strong rally from here – especially if the bond market rout stops.

Interestingly gold has managed to find support around a technically-friendly area circa $1835:

Source: StoneX and TradingView.com

This is where the 200-day average converges with a bullish trend. If it can manage to build a base around here and break a few resistance levels, then surely it will catch the attention of the bulls who are waiting on the side lines. However, if the trend breaks then the wait will have to continue.

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.