Gold prices have been consolidating in a broad range of $1,745-$1,771/oz. There is no compelling reason for a breakout thus far, but what lies ahead?
On the one hand, the dollar stands tall and proud, drawing support from a rally in UST yields. The market expects the Fed to start reducing asset buybacks in November, and investors have become comfortable with that idea. As long as the dollar is strong, gold has little reason to advance.
On the other hand, financial markets are ripe for a correction, since trading bubbles have become highly inflated. There is a certain demand for safe assets, and in this capacity, gold tends to outperform.
Notably, US inflation is gradually increasing. As a rule, gold is a good instrument for hedging inflation risks, so the medium-term trend is not so clear-cut in this case.
Overall, it appears that gold will continue to trade sideways with a chance for additional weakening. However, in a broader context, the odds of upside ahead still look quite plausible.