The precious metal, gold is set to record its first weekly gain in a long time. It seems like bulls have finally returned to town, as the price has cleared a major obstacle yesterday and that it broke above the 50-day SMA on the daily time frame. A lot of the upward move in the gold price is chiefly due to the weakness in the dollar index as it is failing to find any bid due to dovish narrative set by the Fed.
Jerome Powell, the Fed Chairman, said yesterday any rise in inflation this year is likely to be temporary and the Fed isn’t worried about this. Remember, market players have been betting against the Fed for the last number of weeks as they believed that the Fed will have no choice but to throw the towel and accept that inflation is going to get out of control. As a result, they will have to begin start tapering their monetary policy. However, it is important to keep in mind that the Fed has so many tools in monetary tool box which the market players aren’t aware of. The Fed can control inflation without increasing its interest rate.
In addition to this, traders are loving the current moves in the gold price because the European Central Bank also confirmed yesterday that it will be buying more bonds as it sees the economic recovery well away from its goal. So, we have two major central banks which are well away from reaching their goals and traders believe that this is a perfect opportunity for them to start buying gold.
