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- Gold price remains on the defensive ahead of US CPI data
Gold price remains on the defensive ahead of US CPI data
- Gold prices are flat on Tuesday, with the US Dollar losing ground ahead of the US CPI release.
- Investors are awaiting US inflation data for more information about the Fed’s monetary policy plans.
- Gold’s near-term bias remains negative, with hopes of Fed cuts ebbing.
Gold prices (XAU/USD) ticked higher on Tuesday’s early trade, yet with price action unable to find a meaningful acceptance above the $1,990 level.
The precious metal remains practically flat on the day as traders await the release of the US Consumer Prices Index (CPI) figures, which will lay the groundwork for Wednesday’s Federal Reserve’s (Fed) monetary policy decision.
The market consensus anticipates a slight decline in the headline data, which is expected to come in at 3.1% from the 3.2% yearly increase seen in October. The core inflation reading, which strips out the more volatile components of food and energy, is seen steady at 4% year-on-year.
On Wednesday, the Fed is widely expected to leave its benchmark interest rate on hold at the current 5.25%-5.5% band and put the focus on the interest rate projections for next year and on Fed Chairman Jerome Powell’s press conference. Investors will be looking for dovish hints on Powell’s comments to revive hopes of rate cuts in early 2024, which would give a fresh boost to Gold prices.
Daily Digest Market Movers: Gold draws some support from weaker US Dollar, softer yields
- Gold prices have found some support on Tuesday after a two-day decline, favoured by softer US yields and a weaker US Dollar ahead of the US CPI data.
- Investors have digested the unexpectedly strong US employment figures seen on Friday and are looking to US CPI for more cues into the Fed’s monetary policy plans.
- US CPI is expected to have increased at a 3.1% year-on-year pace in November, down from 3.2% in October. The core CPI is seen steady at 4% year-on-year.
- Inflation data is expected to have a relevant weight on Wednesday’s Federal Reserve’s decision and, therefore, it might boost US Dollar volatility.
- The market is pricing a 45% chance of Fed rate cuts in March, while the odds for a May rate cuts are evenly split, according to the CME Group FedWatch tool.
- Geopolitical tensions continue growing amid news of attacks to the US troops in the Middle East by Iran-backed groups. This provides some support to precious metals on the back of their safe-haven status.
Technical Analysis: Gold remains on the defensive, with $1,980 support under pressure
The technical picture for Gold remains bearish, with upside attempts capped well below the $2,000 psychological level. Price action has broken below the main Simple Moving Averages (SMAs) in the 4-hour charts, which leaves the $1,980 support level under increasing bearish pressure.
The mentioned $1,980 is the neckline of a head and shoulders (H&S) pattern and the 50% Fibonacci retracement of the October - December rally. Below here, the next targets would be mid-November lows at $1,934, ahead of $1,838, and the measured target of the H&S pattern at $1,851.
A bullish reversal from current levels would have to breach the $2,000 level to ease negative pressure and shift the pair’s focus towards $2,035 and $2,075.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.32% | -0.14% | -0.10% | -0.39% | -0.47% | -0.52% | -0.20% | |
| EUR | 0.32% | 0.20% | 0.24% | -0.08% | -0.18% | -0.21% | 0.13% | |
| GBP | 0.15% | -0.17% | 0.06% | -0.24% | -0.32% | -0.36% | -0.05% | |
| CAD | 0.09% | -0.23% | -0.06% | -0.30% | -0.40% | -0.45% | -0.10% | |
| AUD | 0.43% | 0.11% | 0.28% | 0.34% | -0.10% | -0.13% | 0.21% | |
| JPY | 0.47% | 0.15% | 0.33% | 0.39% | 0.09% | -0.06% | 0.29% | |
| NZD | 0.54% | 0.23% | 0.41% | 0.45% | 0.17% | 0.03% | 0.34% | |
| CHF | 0.19% | -0.12% | 0.06% | 0.11% | -0.17% | -0.31% | -0.32% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
United States Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: 12/12/2023 13:30:00 GMT
Frequency: Monthly
Source: US Bureau of Labor Statistics
Why it matters to traders
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
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