Gold – Breaking higher or still range-bound?

Period of range tightening at an end

Gold has been in consolidation for days but it may be breaking out of this at the end of the week.

The range has been consolidating in recent days, even at a time when other markets were seeing plenty of volatility on the back of another hawkish move by the Federal Reserve.

That at one time would have been a negative for gold as higher rates are typically associated with lower gold prices. But these aren’t ordinary times. The economic outlook is highly uncertain, risks are severely heightened and inflation is soaring. So even though rates are rising and are expected to continue at a rapid pace, there remains plenty of appetite for gold.

The move today has ended a period of the range tightening but does it constitute a breakout? I’m a little sceptical. Especially as there hasn’t been much of a catalyst for the move. The failure to drop amid a more hawkish Fed is arguably bullish for the price but I’m not sure that’s enough to see it break much higher.

The key level could be $1,760 which is the range high in recent weeks. A break of this could be a strong signal of a broader rally in the yellow metal while a failure may signal that the primary trading band remains in place.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.