The January seasonal trade in gold continues to work out well but since the turn of the month, it has been a rather poor showing on the part of gold bulls. The corrective move lower in the past two weeks has seen price fall from a high of $1,959 to $1,835 currently as the upside move falters.
The break in the momentum comes as broader markets are seeing a bit of a need to rethink. Over the past few months, traders and investors rode on the optimism that inflation is coming down and that central banks may start to lean towards putting a stop to their tightening cycle.
But now that the euphoria has worn off, it is a case of markets having to debate with policymakers as to whether inflation will keep falling back towards 2% and if there is a need to keep hiking rates more aggressively. In the case of the Fed, markets have priced in the terminal top around 5.20% but what if economic data is able to afford policymakers to look for a move towards 6.00%?
A stronger dollar has also factored into the equation as such with the recent recovery in Treasury yields also playing a role.
Looking over to the charts, gold looks set to run into a test of its 38.2 Fib retracement level at $1,828.70 next before sellers will try to push for a move towards support at $1,800.
