Update May 17: After rising nearly 1% and closing the week on a firm footing on Friday, the XAU/USD pair preserved its bullish momentum on Monday and extended its rally after breaking above the critical 200-day SMA at $1,850. At the moment, the pair is rising 1.3% on a daily basis and trading at its strongest level since early February at $1,866. In the absence of significant fundamental drivers, the technical breakout seems to have fueled another leg up in gold. Meanwhile, the 10-year US Treasury bond yield is having a difficult time staging a rebound after suffering heavy losses in the second half of the previous week and helps gold continue to find demand.
Investors seem convinced that the Fed will keep interest rates low for a longer period. This, in turn, continued weighing on the US dollar and extended some support to the dollar-denominated commodity. Apart from this, a generally softer risk tone – amid worries over the continuous surge in new COVID-19 cases in Asia – further acted as a tailwind for traditional safe-haven assets, including gold.
Hence, any subsequent fall might still be seen as an opportunity for bullish traders. This further makes it prudent to wait for some strong follow-through selling before confirming that the recent positive move has run its course and placing any bearish bets around gold.
Gold Price Forecast: 17 – 21 May 2021 – WEEK AHEAD COMMODITY REPORT:
Gold is surging again, but can prices push above 1900? [Video]
Commodity prices are surging across the board with everything from the metals, energy to agriculture markets, trading near multi-year highs as the supercycle gathers pace.
Last week, Iron Ore broke $200 a ton for the first time ever. Palladium broke above $3,000 to hit a new record high and Copper prices surpassed an all-time high.
The bullish momentum also split over into the precious metals with Gold prices rising for a second straight week in a row to settle at its highest since February. While Silver prices closed the week trading near 3-months highs.
There are plenty of reasons why commodities are on the move, but the key driver is rising inflation, which has spurred significant demand for assets with inflation-hedging capabilities.
Fed’s dilemma seems priced in…
As the economies in the West rebound, inflation concerns jump back to the table as central banks and governments around the globe have pumped the system with money during the pandemic. The US Federal Reserve (Fed) has a more challenging task to defend the easy money policy after the Bank of Canada (BOC) and Bank of England (BOE) altered their bond purchases and renewed tapering talks. Also on the negative side could be expectations of further stimulus from US President Joe Biden’s table.
Even so, the market players seem to have already prepared for the Fed’s play down as the US dollar index (DXY) has been on a back…
Go to the news source: XAU/USD extends rally to multi-month highs after technical breakout