Gold investors appear to be calling the Federal Reserve's bluff that it will be able to get inflation under control as prices continue to hold around the $1840+ since last week's breakout move.

Gold prices traded near a two-month high, but Wednesday's breakout came as U.S. bond yields pushed to their highest level in more than two years. The 10-year yield is currently trading at 1.83%, down slightly from Wednesday's rise to 1.87%. Real 10-year Treasury yields jumped more than 50 basis points since late last month and are hovering around -0.60%.

In testimony on Capitol Hill this month, Mr. Powell said inflation is high because supply and demand are out of whack. The Fed can’t solve shipping or supply-chain bottlenecks, but higher interest rates can eventually cool demand by slowing hiring and income growth. Officials are hoping that inflation declines as the supply problems ease and demand shifts from goods, where prices rose sharply last year, toward services, where inflation has been less extreme.

This Tuesday and Wednesday, the Federal Reserve meet to discuss the drop-in unemployment rates-from 5.9% in June to 3.9% in December. As measured by the central bank's preferred gauge, consumer prices rose 5.7% in November from a year earlier.

Interest rates are expected to increase by three quarter percent points this year, according to central bank officials last month. As a result, their benchmark short-term rate would rise to a range between 0.75% and 1% by the end of the year, up from its current level near zero.

Although rising consumer price pressures are leading to expectations for more aggressive monetary policy action from the Fed. My point of view, when policy makers are trying to fight inflation into a slowing economy it could lead to a growing risk of a policy error. I believe rate hikes will have little impact on inflation, which continues to be driven in part by global supply chain constraints. 

Technically, Gold is traded in a range of $1830 to $1847, Markets are looking for a break-out move to buy gold if it reaches a new higher high above the prior high of $1847. This week's trading range, buy at 1830, stop-loss 1815 and take profit 1865.