Gold is holding above $4,600 an ounce, the dollar remains relatively weak, and geopolitical uncertainty is still running high.
That’s a very favorable combination for gold. But after the rally we’ve already seen, I’m much more interested in what happens next.
The market now has to deal with another round of U.S. inflation data. If inflation surprises significantly to the upside, U.S. Treasury yields could start rising again, and expectations for tighter Fed policy could quickly return. That could put some pressure on gold, especially after such a strong run.
But the opposite scenario is just as interesting.
If inflation remains relatively contained, the Fed will have less reason to become more aggressive. That could keep pressure on the dollar and real yields — two factors that matter a lot for gold.
And then there’s geopolitics.
Uncertainty surrounding the Middle East and global energy routes hasn’t disappeared. Neither have concerns about government debt and the longer-term direction of monetary policy. These aren’t necessarily reasons for gold to rise every day, but they continue to create an environment where physical gold remains attractive as a long-term store of value.
That’s why I’m not particularly focused on whether gold gains another $20 or $30 tomorrow.
I want to see how the market behaves when the next important macroeconomic data arrives.
Holding above $4,600 after such a strong rally would be more interesting to me than another quick spike higher. It would suggest that buyers are willing to stay involved even as the market is tested by new information.
Gold has already made its move.
Now we get to see how much conviction is really behind it.
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