Cross currents continue to have positive and negative effects on gold. Today is an excellent example of how rising inflationary pressures and the Federal Reserve’s response to higher inflation create (as well as suppress) cross-currents that push gold higher. Detail cryptocoin.com‘in.
Forces affecting the price of gold
The most active December contract on a gold futures basis was opened at $1783.70, today. Continuing concerns about mounting inflationary pressures pushed gold prices up significantly, and the precious yellow metal slid $1,815.50, breaking $1800 today, ahead of comments from Federal Reserve Chairman Jerome Powell.
President Powell’s comments today had a profound impact on gold, as illustrated by a 15-minute candlestick chart. In a short 45 minutes, gold peaked above $1815 and traded below today’s intraday low of $1783.40. For the remainder of the trading session, gold will briefly test $1800 before settling at $1193.10, a net gain of $1120 for the day, or +0.63% net gain. Today’s announcement by Jerome Powell has alarmed stock investors as the Fed Chair discusses slashing stimulus and changes to highly coherent monetary policies. Regarding the contraction, Chairman Powell said the Federal Reserve is “on track” to begin reducing its asset purchases.
Fed policies
Speaking virtually in a webcast during a panel discussion at the BIS-SARB Centennial Conference, President Powell said the U.S. labor market could continue to evolve and reach “maximum employment” next year. It is widely believed to be the ultimate hurdle for “maximum employment” that will result in the Federal Reserve initiating the process of normalizing or removing the interest rate. President Powell concluded that the Federal Reserve is ready to use rate hikes to combat inflationary pressures. He added that inflation continues to run the risk of moving higher and lasting longer than originally anticipated.
“We need to make sure that our policy is positioned to accommodate a range of possible outcomes,” he said, underscoring the Federal Reserve’s readiness to use its tools to reduce inflation. While it is clear that rising inflation continues to strongly support both gold and silver prices, the actions taken by the Central Bank to limit or soften inflationary pressures have the opposite effect. Therefore, we believe these two forces constitute a double-edged sword when it comes to cross currents or inflation.
The chart above is a daily Japanese candlestick chart of gold futures. We’ve added a compression triangle of lower highs and higher lows to indicate key support and resistance levels. Today’s close at $1,793 is just below the upper resistance line created by a series of lows. Technically, we see $1800 per ounce as the key and critical price point gold should take on a closing basis. An effective close above $1800 will set the next target at $1,836, the high created at the beginning of September.
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