GOLD Prices return to close above summer highs at $1861

Gold prices have rebounded sharply in recent sessions on the back of a

decline in real yields after the latest Fed meeting. Indeed, real

Treasuries yields have fallen sharply since Wednesday of last week, with

the longest 30- and 10-year maturities each losing 20 bps to return

near their lowest levels of the year.

Falling real

rates benefit the gold price, as investors prefer precious metals when

asset yields adjusted for inflation expectations fall.

Nevertheless,

it is hard to imagine real rates being lower than they were at the peak

of stagflation fears this summer when the 10-year real yield reached

-1.2% (compared to -1.1% currently). So real rates don't seem to have

much room to fall, although in theory there is no floor.

The

consumer inflation numbers released this afternoon will most likely be

key for gold prices as they should also influence their inflation

outlook. A higher-than-expected inflation rate would reinforce fears of

stagflation, which would put additional pressure on real rates, while a

lower-than-expected rate would reinforce the scenario that inflation is

only transitory, which should reduce the inflation outlook and thus

support real rates.

In terms of technical analysis,

gold is back to testing key resistance at $1,860, which corresponds to

the latest downswing back in mid-June. Furthermore, gold managed to

clear above the 1,834 level with ease, an area that has been blocking it

since the beginning of the summer.

If traders are

looking to secure their profits, it should be at this resistance level.

Otherwise, a break of these two resistances would be important bullish

signals that would pave the way for further upside towards the June high

at $1916.

(Chart Source: Tradingview 11.11.2021)

Below

$1834, the risk/reward ratio favors sellers. The price of gold could

retreat to the short-term bullish oblique that runs through the August

and September lows.

Disclaimer: This material has been

created for information purposes only. All views expressed in this

document are my own and do not necessarily represent the opinions of any

entity.