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Gold surges 4% on dollar weakness

While the extension of the US Federal Reserve’s current quantitative easing programme could eventually create an inflationary environment, this is clearly not a consideration in the near term.

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The 4% rise in gold can instead be attributed to the dollar sell-off. The greenback has touched upon seven-month lows against a basket of currencies in the aftermath of the ‘surprise’ Fed inaction.

Having bounced from recent lows of $1292, the surge which has brought us back to test the lower band of the bullish channel from the $1080 lows is one to watch. Any move back into this channel will see the $1415 level targeted once again, and a meaningful close above it has the potential to create a more sustained upside move.

Should the gold price fall below the $1350 mark we may be looking at a mere correction rather than a reversal. Any drop below the recent lows should put additional downside pressure on the yellow metal.

Spot gold chart

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