- Investors are on the sidelines waiting for US inflation before making their next move.
- Higher inflation could push gold prices above 1850.00.
- On the charts, the price is stuck in a symmetrical triangle.
Gold futures (GC) closed slightly lower yesterday after moving sideways through the day. This lack of volatility is because most investors are waiting on the sidelines to see what the US inflation data will say about the Federal Reserve’s next move. The price continued trading at around 1850.00 on Friday.
On Thursday, Greenlight Capital hedge fund manager David Einhorn said that the Fed was pretending it could control inflation. He went on to say that the price of gold is likely to push higher in the current environment of rising commodity prices.
“The question is whether there’s enough gold to back up the currency reserves. The answer is for the price of gold to go higher, perhaps much higher,” Einhorn said, speaking at the Sohn Investment Conference, which is being held virtually.
He accused the Fed of “bluffing” as its tools for inflation control were limited owing to the US deficit. An increase in interest rates leads to an increase in the country’s debt.
Investors will pay a lot of attention to the US inflation data coming out later in the day, which will give clues on the Fed’s next move regarding interest rates. Rising inflation could mean more rate hikes, further damaging the US economy.
Such an outcome would see investors running from stocks to safe havens like gold. Subsequently, gold prices would rise due to the increased demand.
Gold futures (GC) technical forecast:
Looking at the 4-hour chart, we see the price consolidating just below the symmetrical triangle. There is indecision in the market, and neither bulls nor bears are ready to move. The price is chopping through the 30-SMA, and the RSI trades below the 50 level, favoring short-term bears. At this point, the price can break out of the triangle on either side.
A break to the lower side would show that the market had made a decision, and bears would be taking charge of the market. Such a move could push the price to 1825.00. On the other hand, a break to the upper side would show bulls taking charge and could push the price to 1880.00.