Recently, gold prices have been impacted by two key interrelated, albeit contrasting factors. The first is US inflation, which recently reached 6.2%, a 30-year high. Gold is a traditional hedge against inflation, and it is this factor that has been pushing up prices since the beginning of the month.
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However, the same high inflation makes the Fed more likely to tighten monetary policy, first by tapering its asset buying program, and later by raising interest rates. This is what will help strengthen the dollar and lower the price of gold.
In the near future, the second factor could prevail, and gold in this case may sink to $1,758.3. However, at the end of last week, gold attempted to rally (unsuccessfully so far) at the resistance level of $1,868.6. If this level is breached, we could see short-term gains, although investors are advised to look for selling opportunities near the resistance zone of $1,903.1-1,903.7.
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