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The price of gold has galloped ahead in the $2,000’s to a high of $2,055.71 on Wednesday in the US session. 

However, a bearish pattern has emerged in the form of a bearish head and shoulders on the hourly time frame.

While gold had started to show signs of consolidation, continued weakness in the USD, a break below -1% in 10yr real rates and signaling that the Fed is weighing the abandoning of preemptive rate moves have combined to see the yellow metal break higher,

analysts at TD Securities argued.

But, we caution the yellow metal is still running hot relative to these observable drivers.

Hourly chart

In further explanation of their caution over chasing this ride higher, the analysts continued,

While positioning is not overly stretched, it is certainly at the higher end of the range, and the trade is very much consensus, suggesting excess retail speculation and momentum could be contributing to the most recent leg of the rally.

As such, we think the nature of the rally continues to warrant caution as it leaves the yellow metal at risk of consolidating lower before a true breakout.

On the industrial side, silver continues to outperform gold, seeing the ratio fall back to five-year average levels.