Gold is also supported by weakness in the US Dollar. The US Federal Reserve is likely to remain upbeat on the outlook for both the economy and inflation.
Gold is now trading around $1,335 in New York session, edging up by 0.35% on renewed concern about the US inflation and a weaker US dollar on Monday. Gold rose to1,341earlier on Monday but was sold after the optimistic comments by St. Louis Fed president James Bullard about the US economy.
Bullard said that the US economy is looking very good and he is not concerned by stress levels following market selloff. The promise of tax reform may boost up private investment. But he is little concerned that Fed may hike too fast although he is now more optimistic about US inflation prospect as a rise in 10-year bond yield is partially driven by a rise in inflation expectations among investors.
On the US economic data front, new home sales figure for January came subdued with little effect on the US Dollar ahead of Fed's chairman Jerome Powell first Congressional testimony scheduled for Tuesday. Jerome Powell is likely to repeat the policy stance from the monetary policy report delivered last Friday while being upbeat on the US economy and inflation.
Earlier, on Monday Asian session, USD lost some strength after the BOJ Governor Kuroda said Japanese prices (inflation) are rising. He also reaffirmed his view that the BOJ needs to continue with the current powerful monetary easing program to achieve its 2% inflation target.
Thus, the increasing debate about inflation coupled with consistent weakness in USD is supporting the yellow metal right now despite reduced physical demand from India and China on seasonal and regulatory issues.
Technically for Gold, 1315 area is now immediate support and sustaining below that 1,305-1,285 zones may be visible soon. For any meaningful recovery, Gold must stay above 1,335-1,340 zone for 1,356-1,366 area.
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