The bullion could see fresh multi-month highs in the coming days or weeks
Following a negative start to the week, gold prices briefly surged to five-month highs around $1,877 but failed to hold onto gains and retreated to the $1,850 area. However, the buying pressure reemerged on Wednesday, with the bullish bias persisting today. The bullion was last seen changing hands around $1,867, nearly unchanged on the day.
Rising inflation concerns make the yellow metal attractive as a hedge from rising consumer prices across the globe. Against this backdrop, the bullion witnessed two weeks of strong gains before turning flat this week. However, it looks like the upside potential persists at this point, and gold prices could see fresh multi-month highs in the coming days or weeks.
However, the precious metal could also come under some light selling pressure if Fed officials signal that asset purchases reduction may be speeded up to fight inflation. As a reminder, the US CPI jumped the most in over 30 years in October. Adding to inflation-related worries, the UK consumer prices rose to the highest levels in ten years last month, suggesting the Bank of England would announce the first rate hike in December.
From the technical point of view, the outlook remains upbeat as long as the prices stay above the $1,850 intermediate support and the ascending 20-DMA, today at $1,820. On the upside, the next target for bulls arrives in the $1,900-$1,905 area last seen in early June. The daily RSI hasn’t entered overbought territory just yet, suggesting there is room for further gains at this stage.
In the immediate term, gold prices may struggle for direction as investor sentiment looks mixed while the dollar has steadied after the recent rally. In other words, a short-term consolidation could be expected amid the current uncertainty in the global financial markets.