Inflation soared to its highest level since 1982 and yields spiked, but gold has nonetheless found support. The yellow metal recovered as the US dollar turned lower after its initial rally. Will the breakout hold this time?
Gold’s rise today underscores its status as safe-haven commodity, and an effective inflation hedge. Investors seem happy to forgo the yield they would get by investing in government bonds. At just over 2% on the benchmark 10-year government debt, the yield is very low compared to the 7.5% nominal inflation rate. So, you can understand why gold investors are not too freaked out about the latest rise in global yields.
In order to protect their wealth against the impact of soaring inflation, which is eroding the value of fiat currencies around the world, gold bulls clearly expect price appreciation.
Some of those expectations may be because of this technical breakout we are witnessing on the long-term bull-flag pattern on the weekly chart of gold:
But while the weekly chart is starting to look bullish, the daily chart still shows an unresolved picture:
On the daily time frame, gold has now entered the key $1830-$1850 resistance range. It will need to clear through this area for confirmation.
