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Gold is oscillating around the $1785 level and remains on the cusp for a breakout above the $1800 mark which is proving to be a tough barrier but that should be surpassed due to higher inflation expectations, strategists at TD Securities apprise.

Key quotes

“Gold continues to trade on the cusp of a breakout above the $1800/oz level but has failed to do so just yet. With a slight risk-off tone to start the morning, and with the increase in inflation expectations pausing in line with risk appetite, the level has proved to offer fairly strong resistance.” 

“Despite the short-term noise, we believe gold is the midst of a regime shift, transitioning from trading as a safe-haven asset to an inflation-hedge product. Long-term inflation expectations are rising in sync with risk-on behavior, while rates-vol remains deeply constrained amid uber-supportive policy, fueling a process that weighs on real yields.”

“With 10y breakevens continuing to print new post-Covid highs, the normalization in inflation expectations may remain a powerful driver lifting gold prices deeper into $1,800/oz territory.”