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Will XAU/USD buyers retain control on US CPI release?

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  • Gold price finds support once again near $2,020, as all eyes remain on US inflation data. 
  • The US Dollar loses further ground despite the recent advance in US Treasury bond yields.
  • Gold price stays between 21-day SMA and 50-day SMA, awaits a range breakout.

Gold price is attempting a bounce in Asian trading early Thursday, having found fresh demand again near the $2,020 region. Gold buyers are retesting their luck, as all eyes turn toward the US Consumer Price Index (CPI) inflation data due at 13:30 GMT.   

Gold price braces for volatility on US CPI report

Asian traders are witnessing some cautious optimism, following a positive close on Wall Street overnight. However, they prefer to stay on the sidelines ahead of the all-important US CPI data, which is likely to significantly impact the market’s pricing of the US Federal Reserve (Fed) interest rate cuts this year.

The US CPI is expected to rise at an annual pace of 3.2% in December, up slightly from a 3.1% increase in November. The Core CPI inflation is set to decline to 3.8% YoY in the reported period versus 4.0% in November. Meanwhile, the monthly CPI is seen increasing 0.2% in the same period vs. a 0.1% rise in November while the Core CPI inflation is likely to hold steady at 0.3% MoM in December.

Sticky shelter price inflation could likely outweigh the recent decline in Oil prices, fuelling the uptick in the monthly CPI print. A hotter-than-expected monthly CPI figures may help push back against the Fed rate cuts in the first quarter of 2024, providing a fresh lift to the US Dollar at the expense of the non-interest-bearing Gold price.

On the other hand, Gold price could extend the recovery beyond $2,050 if the inflation data comes in softer-than-expected and reverberates dovish Fed expectations, cementing a March Fed rate cut. Markets are currently pricing in a 66% probability that the Fed will slash rates in March.

In the meantime, markets’ prudence is expected to leave Gold price gyrating in a familiar range, despite the recent weakness in the US Dollar.

On Wednesday, the upside attempts in Gold price were capped by resilient US Treasury bond yields, as the risk rally in global stocks reduced the inflows in the US Treasury bonds.

Gold price technical analysis: Daily chart

The intraday technical outlook for Gold price remains the same, as the bright metal is likely to remain confined between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,045 and $2,016 respectively in the run-up to the US CPI showdown.

The 14-day Relative Strength Index (RSI) indicator is flirting with the midline, supporting Gold buyers alongside the 100- and 200-day SMA Bull Cross confirmed last Friday.

If the rebound sustains on soft US inflation readings, the immediate resistance is seen at the 21-day SMA at $2,045. The next bullish target for Gold price is envisioned at Friday’s high of $2,054, above which doors reopen for a test of the $2,100 barrier.

On an upside surprise to the US CPI data, the initial support is seen at the $2,015 confluence, where the 50-day SMA and Monday’s low coincide. A daily closing below the latter is critical to resuming the downtrend toward the $2,000 mark.

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

  • Gold price finds support once again near $2,020, as all eyes remain on US inflation data. 
  • The US Dollar loses further ground despite the recent advance in US Treasury bond yields.
  • Gold price stays between 21-day SMA and 50-day SMA, awaits a range breakout.

Gold price is attempting a bounce in Asian trading early Thursday, having found fresh demand again near the $2,020 region. Gold buyers are retesting their luck, as all eyes turn toward the US Consumer Price Index (CPI) inflation data due at 13:30 GMT.   

Gold price braces for volatility on US CPI report

Asian traders are witnessing some cautious optimism, following a positive close on Wall Street overnight. However, they prefer to stay on the sidelines ahead of the all-important US CPI data, which is likely to significantly impact the market’s pricing of the US Federal Reserve (Fed) interest rate cuts this year.

The US CPI is expected to rise at an annual pace of 3.2% in December, up slightly from a 3.1% increase in November. The Core CPI inflation is set to decline to 3.8% YoY in the reported period versus 4.0% in November. Meanwhile, the monthly CPI is seen increasing 0.2% in the same period vs. a 0.1% rise in November while the Core CPI inflation is likely to hold steady at 0.3% MoM in December.

Sticky shelter price inflation could likely outweigh the recent decline in Oil prices, fuelling the uptick in the monthly CPI print. A hotter-than-expected monthly CPI figures may help push back against the Fed rate cuts in the first quarter of 2024, providing a fresh lift to the US Dollar at the expense of the non-interest-bearing Gold price.

On the other hand, Gold price could extend the recovery beyond $2,050 if the inflation data comes in softer-than-expected and reverberates dovish Fed expectations, cementing a March Fed rate cut. Markets are currently pricing in a 66% probability that the Fed will slash rates in March.

In the meantime, markets’ prudence is expected to leave Gold price gyrating in a familiar range, despite the recent weakness in the US Dollar.

On Wednesday, the upside attempts in Gold price were capped by resilient US Treasury bond yields, as the risk rally in global stocks reduced the inflows in the US Treasury bonds.

Gold price technical analysis: Daily chart

The intraday technical outlook for Gold price remains the same, as the bright metal is likely to remain confined between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,045 and $2,016 respectively in the run-up to the US CPI showdown.

The 14-day Relative Strength Index (RSI) indicator is flirting with the midline, supporting Gold buyers alongside the 100- and 200-day SMA Bull Cross confirmed last Friday.

If the rebound sustains on soft US inflation readings, the immediate resistance is seen at the 21-day SMA at $2,045. The next bullish target for Gold price is envisioned at Friday’s high of $2,054, above which doors reopen for a test of the $2,100 barrier.

On an upside surprise to the US CPI data, the initial support is seen at the $2,015 confluence, where the 50-day SMA and Monday’s low coincide. A daily closing below the latter is critical to resuming the downtrend toward the $2,000 mark.

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.


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