Bullish traders failed to hold gold at $ 1,900, so it turned around and traded downwards. Most likely, prices will remain volatile, at least until the yellow metal reaches $ 1950. Only by then will new buyers emerge, which will push gold to $ 2,000.
Gold slipped last Friday when many investors closed long positions due to the rise in US Treasury yields and dollar. Inflation also jumped to its highest level since 2008, but some analysts believe that growth will be short-lived, hence, investors should monitor whether it will continue to increase, or return to the Fed's target, which is 2%.
But if the Federal Reserve maintains its dovish stance on monetary policy, headline inflation will remain high for a long time. This is good for gold because slightly higher inflation and low interest rates lead to negative rates, which is bullish to the yellow metal.
Therefore, the meeting of the Fed this week is very important, because during it the committee may start talking about policy changes, although no official announcements will take place until September.
Analysts believe that gold will remain in a bull market, even though there was a strong selling pressure last week. Edward Moya, a market analyst for OANDA, said the Fed will be one of the last central banks to tighten monetary policy, which should give gold enough time to try to break above $ 1950.
Moya sees gold buyers showing up at $ 1,870, but warned that the next few months will be volatile for the precious metal.
Other important data to be noted this week are retail sales, PPI, industrial output, new home permits, jobless claims and manufacturing activity.