Blog

The gold market is sharply higher in late morning trade today as concerns over inflation mount. Spot gold is up some $16 per ounce, now standing at $1785 and change. After some rough going in recent weeks, the metal has recovered and is now within striking distance of previous resistance at the $1800 level.

The yellow metal is moving sharply higher today even as stocks also put in a strong performance. The benchmark Dow Jones Industrial Average is up nearly 200 points in late morning action. Recent equity upside has put the benchmarks within striking distance of previous all-time highs. If stocks can continue to mount an offensive even  with the threat of higher inflation and other factors, new all-time highs are not only possible but probable.

The desire for alternative assets is also driving a record run for Bitcoin today which has now eclipsed its previous all-time highs. The digital currency is up over $2000 per unit today and now stands at nearly $67,000 per unit. The lack of upside chart resistance from here could make for a heck of a run higher. Bitcoin could

easily shoot to the $100,000 level or higher in short order and may never look back. Gold’s gains today, despite the upside in Bitcoin, make the market even more impressive and could point to further gains in the days ahead.

Also providing gold a boost today is a weaker dollar and stronger crude oil. Yields have been mostly stable,  witb the benchmark 10-year Treasury yielding about 1.65% today. A rapid and sharp rise in yields has been the subject of much fear in recent months, although such a rise has yet to materialize. Nevertheless, a sharp or rapid rise in yields could provide investors with reason to steer clear of gold, although such a scenario seems very unlikely at this point.

Gold’s improving chart posture may attract further buyers in the days ahead. The gold bulls are in control of the daily chart and have improved upon a three-week old uptrend. The real tests for the bulls lie first at $1800 and then the mid-1830s. If the bulls are able to take out the mid-1830s on a closing basis it could pave the way for sharper gains to follow. A failure to take this level out may exhaust the bulls, however, and could lead to a sharp price reversal that may put the bears in the driver’s seat.

The gold market has been in a consolidation phase for several weeks now. That sideways price action could continue, although it l;ikely will not go on forever. The longer the market spends in recent areas, the greater the potential breakout or breakdown may be. The fear of inflation may keep the bulls on the offensive and could provide solid reason for any significant dips to be bought. Dollar weakness, dovish monetary policies and other factors may also contribute to gold’s bullishness in the months ahead.