FX.co ★ Gold rises following inflation report

Gold won its luster with investors amid a surge in inflation to a three-year high. It rose by almost 3% last week. After having broken above $1,850 per ounce, gold may climb higher. Gold won its luster with investors amid a surge in inflation to a three-year high. It rose by almost 3% last week. On Friday, gold futures for December on Comex traded at $1,865.90.

"It is all about inflation. The market is starting to embrace the fact that inflation will be longer-lasting. It will take years to fix the supply chain issues due to pandemic, all the stimulus, and tons of pent-up demand," RJO Futures senior market strategist Frank Cholly said.

The price of gold is likely to fluctuate in the range of $1,835 - 1,875.

A move below would indicate the end of the current rally, while a move above could signal a jump to $2,000 an ounce.

This is how technical buying works, Cholly points out. If the upper-trading range is broken, traders may be concerned that they could lose the proper moment to enter the market. So, they may start open long positions.

"The path towards $1,900 is very clear now. Gold below $1,800 was seen as a good buying opportunity. We have to watch if central banks try to come in and hedge this thing. Prospects for the first couple of months of 2022 are good. We see a year-end rally that carries through into January and February," Sean Lusk, the co-director of Walsh Trading, noted.

There is a high probability that gold may slightly decline before resuming an upward movement Gold is expected to rise above $1,875 per ounce, heading for 2020 record highs exceeding $2,000, TD Securities head of global strategy Bart Melek pinpoints.

There are only a few months left before the Fed may take a more aggressive approach to monetary policy.

After the Fed takes a hawkish stance on monetary policy and starts raising the key rate, gold may decline. However, in the long term, it is likely to gain momentum as the Fed will gradually tighten monetary policy.

This week, the economic calendar includes the two most crucial macroeconomic events, namely retail sales and manufacturing data on Tuesday.

Monday: NY Empire State Manufacturing Index

Tuesday: Retail sales, Manufacturing data

Wednesday: Monthly housing starts and building permits

Thursday: Initial jobless claims, Philadelphia Fed Manufacturing Index