Gold lifted by lower US inflation, dollar and yields

At the time of writing, gold price is trading at $1786.66 versus the previous closing price at $1792.59.

Lower than expected inflation data in the US is exercising downward pressure on the US dollar. This, along with lower real yields, is expected to allow gold to retest $1,800 according to economists.

Retreating US inflation has triggered Dollar selloffs, which in turn can support gold price. US benchmark real yields are also levelling-off from a recent high, narrowing opportunity costs.

Inflation is hovering well above the Federal Reserve’s target of 2%, leaving little hope of the Fed turning dovish anytime soon.

Short covering of investor positions has been driving the gold price, but strategic positioning of ETF holdings has not been strong. Physical demand is weakening as seen in the spot premium’s retreat from October, but official purchases are holding up.