Gold extends winning after hitting the $1900-mark, next goal is 2200!(With Trading Strategy)

Gold prices rose above the key psychological level of $1,900 per ounce on Wednesday, helped by a weaker dollar and growing inflation concerns after Federal Reserve officials maintained a dovish stance over rates.

The spot gold rose 0.51% to $1908.13 per ounce by 15:50(GMT+8) .

The dollar index was pinned near a 4-1/2-month low against its rivals, making gold cheaper for other currency holders.

Benchmark U.S. Treasury yields fell to a two-week low of 1.56% overnight, reducing the opportunity cost of holding non-interest bearing gold.

"A weaker dollar is helping and growing inflation risks are outweighing everything right now. This is about hedge against inflation right now," said Stephen Innes, managing partner at SPI Asset Management.

"Even if inflation is high, the Fed going to be very, very dovish. What really matters for gold is front-end real rates. The Feds will continue to keep front-end rates low, which is going to weaken the dollar and gold is going to do quite well.”

U.S. consumer confidence hovered at a 14-month high in May as optimism over jobs tempered concerns about rising inflation and diminishing government financial support.

The U.S. Federal Reserve can curb an outbreak of inflation should it occur without throwing the recovery off track, Fed vice chair Richard Clarida said on Tuesday.

The U.S. Federal Reserve can curb an outbreak of inflation should it occur without throwing the recovery off track, Fed vice chair Richard Clarida said on Tuesday.

Fed policymakers have begun to acknowledge they are closer to debating when to pull back some of their crisis support for the U.S. economy, even as they say it is still needed to bolster the recovery and employment.

U.S. Senate Republicans plan to unveil a counteroffer to President Joe Biden’s $1.7 trillion infrastructure proposal on Thursday, though one of their leaders said on Tuesday the two sides remain far apart.

The European Central Bank must keep its money taps fully open, as the euro zone economy is still in the throes of the COVID-19 pandemic despite progress in vaccination campaigns, ECB policymaker Yannis Stournaras said.

Some investors view gold as a hedge against higher inflation that could follow stimulus measures.

The gold market was one of the last assets to rise on inflation fear headlines, and that is because there has been a regime change in the precious metal market, said Portfolio Wealth Advisors president and CIO Lee Munson.

Investors shouldn't rush to buy gold because they fear a crisis or hyperinflation. For gold, it is now all about the central bank's expansion of the balance sheet, Munson told Kitco News, adding that gold will rise to $2,200 before the Federal Reserve starts raising rates.

"I don't buy gold for a crisis. I buy it because when there's a crisis, and I think the central banks are going to print money like there's no tomorrow, that's the time when I want to have a larger holding of gold," he said. "My ultimate target in this cycle of money printing is $2,200 an ounce. That's between here and when the Fed starts to raise."

Munson makes a distinction between gold climbing along with the balance sheet expansion and not with inflation fears because not all countries will end up getting hyperinflation with massive money printing. But gold will still be a winner either way.

"I don't think that inflation and gold are really that tightly connected. Gold moves are related to inflation. One of the biggest problems people have with gold is walking around saying it's an inflation hedge. But that's not necessarily true. We had plenty of inflation in the 80s, 90s, and gold went down. But, when you have countries outside the U.S. that have hyperinflation, and the money gets debased, gold is a store value. It's been that way for thousands of years. That's why people buy it because they're worried about their currency being debased," Munson explained.

To understand gold price moves better, investors need to watch the expansion of the money supply. "It's the expansion of the federal balance sheet. That to me is what really drives the price of gold versus just inflation picking up," he said.

Inflation is definitely a risk, but people are overreacting to the magnitude of the actual price pressures, he added. 

A lot of investors are assuming that inflation will jump and the Federal Reserve will overreact. Munson added that he is not convinced that will happen.

The Federal Reserve is unlikely to lose control because they control the money and the rates, he stated.

Trading Strategy (source: Trading Central)

Pivot: 1897.00

Our preference: long positions above 1897.00 with targets at 1916.00 & 1923.00 in extension.

Alternative scenario: below 1897.00 look for further downside with 1889.00 & 1882.00 as targets.

Comment: the RSI advocates for further upside.

Supports and resistances:

1933.00

1923.00

1916.00

1907.00 Last

1897.00

1889.00

1882.00

Guideline for Trading Central strategy 

Trend chart reading guideline

1. First look at the time period in the upper left corner of the chart: ·30MIN and 1H chart shows the trading suggestions for intraday ·Daily chart shows the market trend analysis in next 2-3 days

2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.

3. The red and blue thin curves in the Candlestick chart chart are technical indicators: Red line is MA20+Bollinger bands, Blue line is MA50. under the Candlestick chart chart are also the technical indicators: Blue line is RSI, Red line is 9MA;

4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.

How to use TC strategy？

1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell. 

2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.

3. [Alternative scenario] is the plan B for your reference. 

4. [Comment] is the technical analysis of market trends and technical support for trading strategies. 

5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.

Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.