Gold’s six-week rally continued and, apart from renewed momentum following the move above the 200-day moving average, now support at $1845 and the downtrend from the August high. One of the most important developments for gold has been stable U.S. Treasury yields and a weaker dollar, as well as very high crypto volatility denting the novice sector’s store-of-value credentials. Something that was highlighted by comments from JPMorgan saying that big investors have started to switch out of bitcoin and into traditional gold investments as inflation fears heat up.
Silver has, since its early April low, outperformed gold and at several junctures during the recent rally helped gold to push through key resistance levels. However, after seeing the gold-silver ratio fall from above 70 ounces of silver to one ounce of gold in early April to a low of 65.50, the crypto collapse on Wednesday combined with profit taking among industrial metals, has seen the ratio move higher to around 67.5. This has highlighted gold’s newfound demand from investors seeking a haven against underlying market uncertainty and rising inflation pressures.
For the gold rally to extend beyond current levels, U.S. economic data needs to continue the recent downward trajectory. While not reducing gold’s supportive inflation pressures, a corrective period of the U.S. data cycle should continue to hold down U.S. Treasury yields while adding downward pressure on the dollar.
The key level to watch on a break above $1876 is $1922, the 61.8% retracement of the August to April correction. Support at $1845 (200-day ma) followed by $1818 (21-day ma).