James Hyerczyk
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Comex Gold

Gold futures are surging again on Friday as Treasury yields resumed their retreat following an early session rise and the U.S. Dollar Index edged toward its lowest level since March 18. Gold’s sharp rise this week has put the precious metal in a position to post its best performance in five weeks.

At 11:46 GMT, June Comex gold is trading $1777.80, up $11.00 or +0.62%.

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Gold’s gains came despite U.S. data showcasing robust retail sales and a significant drop in weekly jobless claims and a record growth in China’s first-quarter GDP.

The price action indicates investors are putting their trust in the Federal Reserve to keep interest rates lower for longer even if inflation jumps above 2% for a few weeks or months.

Powell’s Dovish Comments Set the Tone

Despite what he sees as a rapidly recovering economy, Federal Reserve Chairman Jerome Powell has reaffirmed the central bank’s commitment to keep loose monetary policy in place.

That includes a statement of near-certainty that interest rates won’t be going anywhere as inflation remains tame and millions of Americans remain in need of assistance as the nation rebuilds from the damage caused by the COVID-19 pandemic.

“I think it’s highly unlikely that we would raise rates anything like this year,” Powell told CBS “60 Minutes” journalist Scott Pelley in an interview broadcast Sunday evening.

I’m in a position to guarantee that the Fed will do everything we can to support the economy for as long as it takes to complete the recovery.”


Daily Forecast

Powell said he worries about rising COVID cases and ongoing cyberattacks that one day could cause serious damage, but he does not worry about financial system stability or inflation.

Consumer inflation is currently running around 1.6% now and remains well below the Fed 2% target. The central bank has pledged to keep rates low even if inflation would run somewhat above the target rate for a period of time.

When it comes to inflation, Powell said he would “like to see it on track to move moderately above 2% for some time. When we get that, that’s when we’ll raise rates.”

Powell comments have greenlit the current rally and it looks like there is time for it to develop into a major move. The key level to watch is $1788.50. Overcoming this level could trigger a further rally into the February 10 top at $1858.90.

However, I don’t think the market will attract enough buyers to drive prices through the high for the year at $1969.10. In my opinion, this will be difficult given the huge improvements in the economy.

The best target zone for this rally is $1829.90 to $1866.30. If you’re long then think about lightening your position on a test of this area.

For a look at all of today’s economic events, check out our economic calendar.
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