Gold flies higher today amid inflation concerns in the US and globally. Even as treasury yields hit a 2-year high, the metal jumped above a key resistance level and is looking to test another.
Although we are seeing considerably high gains for gold in the short term, it still seems unlikely that the metal will go back to the $1,900-2,000 mark because of the bond yields moving higher and USD gaining strength.
We are also looking at what could be a potential spike in retail demand which never bodes well up against major institutions who seems to be selling gold.
Thus, this recent spike could be serving as a trap to retail investors, so be careful when trading this pair as we could see big money closing positions after catching a one-and-a-half percent gain on gold.
In the bigger picture, gold looks like it could be a solid trade in the short term for those trying to find bullish setups. However, this move doesn't seem like it will last for very long considering the other factors going on with the USD and treasury yields. The safer, more lucrative bet in the longer term would be on a dollar that yields more interest over time.
We're looking at a stronger bullion in the short term, but coming March- or the weeks leading up to the March meeting- we may not see this rally last. If inflation is the factor pushing gold upward, interest rate talks will most likely send it back down again.
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