Gold blasted through $1835 resistance yesterday after US October CPI recorded the highest print in over 30 years. The rally was supported by US 10-year real yields which in the immediate aftermath dropped to a record low at minus 1.25 percent. While the narrative had developed in the wake of the FOMC meeting last week that the Fed would look through high inflation numbers, preferring to focus mostly on the labor market, these numbers were sufficiently hot to jolt the market, raising Fed rate hike expectations for next year.
Gold’s inability to break above $1835 had since July supported a dislocation between rangebound gold and falling real yields. Despite the stronger dollar during this time, it can still be argued that gold has got some catching up to do, with real yields around current levels potentially pointing to a gold price above $1900.