Gold rallies considering inflation fear

A pause in this week's rally in US Treasury yields dragged the dollar down Thursday while rising commodity prices and economic optimism lifted the Canadian and Australian currencies.

Recently, the dollar has not performed as well as expected, despite rising expectations for the Federal Reserve to hike interest rates as soon as March to curb rising inflation.

With risk trades benefitting from better performance in Asia following the PBOC cut rates earlier today, the dollar index continued edging lower between the 50 and 100-day EMAs after peaking at around 95.70. Since then, the optimism has waned a bit although stocks are still slightly more positive. Ten-year Treasury yields remain around 1.83%, little changed in general but at elevated levels.

The bullish bias in gold is picking up

Gold has been consolidating in a triangle pattern over the past year. Yellow metal prices have risen steadily since bottoming at 1750 in mid-December. After a period of range-bound trading, gold buyers managed to surpass the 1831 barrier on Wednesday as bullish momentum picked up.

Intensifying buying pressure can prompt buyers to eye the 1852 hurdle, which lines up with the upper edge of the triangle pattern.

The ECB's policy will diverge from the Fed's

On Thursday, Christine Lagarde, president of the European Central Bank, spoke at the virtual World Economic Forum, stating that Eurozone conditions are not the same as those stirring the Federal Reserve to raise interest rates. She pointed out that wages are rising slower in Europe and that over half of the inflation that is currently being reported is due to energy prices. The ECB releases the accounts of its last meeting later Thursday.

Events of today

Thursday's market will also pay attention to U.S. jobless claims data, which last week showed the first noticeable impact of Omicron-variant Covid-19 across the country.

In addition, the Philadelphia Federal Reserve will release its monthly business survey, while existing home sales data for December will also be released.