Gold almost flat on a recovery in US dollar, but inflation concerns persist



Gold is now trading around $1357 in the New York session, edging up by almost 0.15% on some recovery in the USD. However,  the concern of higher US inflation or rather reflation may also be supporting the yellow metal as traditionally; Gold is seen as inflation hedged physical asset.

The broader picture is a turnaround of the US Dollar after it reached new lows. Today, the USDJPY plunged below 106 in the early Asian session after the BOJ Governor’s comments, which includes several references about “exit strategy” and subsequently USDJPY made Asian session low of 105.53, the lowest in 15-months.

The market is concerned about an imminent change in BOJ policy guidance and US twin deficits. The worry about the weakness of the US Dollar triggered a hawkish comment by Japan’s Finance Minister (Aso). This is a change from his previous stance. Aso said on Thursday that the currency’s strength isn’t abrupt enough to require an intervention at this point.

Things indeed changed. The  USD recovered from the late Asian session today after Japanese government said that it is watching Yen move with “greater” sense of concern and is ready to act (intervene) when needed. Subsequently, Gold also dropped to the day low of around 1352.

Technically, Gold has now good support of around 1340-1335 area. Sustaining above the 1366-1370 zone, it can surge further.