December 27, 2021 - (Gold Market Wire) - The market is still thin between the Christmas and New Year's holiday period, but the current state of the Gold market is mildly encouraging. The chart tells the story:

Yes, we've had some wide swings above and below the channel we describe above. But the essence of the market has been a slow, grinding sideways-to-lower movement over the second half of the year - punctuated by the occasional break-out / break-down. Right now, however, our move above the channel looks like it could have a more secure footing. Consolidation above the channel high is occurring, albeit on small volume, but because we haven't had a screaming gap higher we think the market could gain some traction here. Our previous trading day has elements of a classic back and fill and is encouraging.

A closer look:

The fact that both moving averages have been cleared is an encouraging development, and the gap from Dec. 22 and 23 is being consolidate on. That's encouraging action to us. Length against the trend line is game on for a spec, or a small position, in what is, of course, a thin market. A little bit of recent US Dollar weakness is giving us a tail wind in Gold, and we are encouraged by it.

On the more macro side, the removal of that key word 'transitory' from the latest barrage of "Fed-speak" lexicography is pointing to the fact that the Fed wants to be in front of the game of what it is now intimating as a more permanent feature. No doubt about that. Prices surges in the commodity sector look fundamental in nature, and are anything but transitory. We don't need to look much further than Wheat, to see how the agriculture market is on fire in a way that can hardly be described as transitory.

That chart is no passing phenomena. Inflation is roaring, and all those years of the food markets sitting on their heels, and the zero bound rates are now whipsawing into action. We expect more of it. Gold, if anything, is in catch-up mode.