Gold Prices Pull Higher, Shakes Off Reflation Trades

Gold prices charged higher on Feb 9, adding to Monday's gains as bullion traders appear to be shaking off reflation trade. Albeit last week's developments, specifically the lining up of market fundamentals to pressure the bullion, the rebounding gold prices come as a relief. It may be the foundation of another arm higher, countering January sell pressure. The United States' labor situation is sending USD bulls packing. Accordingly, the present negative correlation between the greenback and the shiny metal could support bullion prices in an upleg marking USD peaks.

Details: 

Monetary policymakers and politicians are confident that the US economy will bounce back strongly from the coronavirus pandemic. However, the problem appears to be employment. Against expectations, there is a contraction. The job market is not picking up as faster as anticipated. Worse, average earnings are declining despite the reflation steps taken by the FED. The central bank is pumping billions into the economy in hopes of reviving the damage done in 2020. Specifically, the goal is to give businesses a lifeline following last year's severe coronavirus effects. 

Impact on gold Prices: 

Bullish. The Federal Reserve is pumping money and will add more by March 2021. However, with helicopter money priming the economy, the central bank also expects inflation to rise above two percent. In combination with the labor market, the odds of gold rallying remain high.

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