Gold Gains Momentum Amid Week of Inflation Worry

In commodities news, the price of gold has been a beneficiary in an otherwise unpredictable week for the market. The precious metal rallied well in the early parts of the week to break $1830 and still holds on to trade close to its 200-DMA heading into the Friday trading session. The midweek spike was brought about mainly through dovish Fed comments with Chief Jerome Powell again dismissing inflation as a transitory concern. Low treasury yields although creeping up slightly are a further help. Meanwhile, oil prices continue to slump with an increase in output expected to come soon.

Rally Pulls Back but Gold Remains Strong

The early part of the week and release of hotter than anticipated inflation data really caused some concern in the market. The strengthening Dollar which typically has a negative impact on gold prices though did not seem to put a dent in the market. This could also be due to an uncertainty among traders who may opt to hold their positions as a hedge against any possible inflation.

By the middle of the week though, the stationary price of gold received some positive news and rallied strongly. More backing from Fed Chief Jerome Powell in an attempt to quell any overheating concerns would seem to have been effective. This news pushed gold prices back above $1830 and although they have paused since, the precious metal appears well set up.

Powell Comments Help Gold Push Higher

Fed Chief Jerome Powell spoke twice this week and on both occasions reiterated the current position of the Federal Reserve. This is that they view inflation still as a transitory concern, and expect job growth to continue as the nation gets back to work and reopening. With no hint of concern or tapering, this positivity has managed to move the needle for gold and other precious metals.

The dip back in strength of the Dollar forex market yesterday even though it is slight, reflects some degree of confidence from traders that the positive run across the economy can continue.

OPEC+ Agreement Pushes Oil Prices Lower

Oil prices fell again on Thursday having slipped by similar margins of as much as 2% on the previous day. This comes as an agreement was reached between the OPEC group of major oil-producing nations. The deal should now see more oil supplied to a market where supply had been constrained and prices pushed higher. The compromise coming almost a week after the deal previously collapsed without support from the UAE.

Still, analysts do not expect a huge change to happen quickly in this market and are still forecasting higher prices of around $77 per barrel while the supply increases take hold. There is also no sign of Iranian oil supply returning to the market any time soon, negotiations there have been pushed back to mid-August.