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Gold buyers stick to technical breakout so far today

Gold up 0.7% to $ 1,862 on the day

Amid the reaction to the US CPI data yesterday, gold pulled off a major technical breakthrough to its highest levels since mid-June as real yields tumbled to new all-time lows. And so far today gold buyers are relying on this as prices rise in European trade.

Gold is up 0.7% at $ 1,862 now after securing a bullish breakout above key trendline resistance and July-September highs in the $ 1,830-34 region yesterday.

From a technical standpoint, things are looking good for buyers to potentially head to the $ 1,900 level and retest the May and June highs at $ 1,914-16.

That said, the break here is largely due to the fact that the bond market is reacting quite brutally to the US CPI data. This is a debate that revolves around the inflation debate and therefore the bullish push here could still be subject to volatility down the road.

However, there are two encouraging signs at the latest breakout. The first is that the price has been coiled in a narrow range for many months now, so there is a sense of release as traders bet on the technical breakout to the upside. The other is that gold is managing to build on gains even as the dollar has strengthened significantly at the same time since yesterday.

I’m not going to argue against the technicalities, but I’m not too convinced that it is the breakout that gold buyers are looking for to establish major trends.

But it could be a start before the start of the December through January season, which has proven to be a constant tailwind for the yellow metal over the years.


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