- Gold price bulls eye the 50% reversal as a resistance zone that could hold.
- Gold price bears look for a break of $1,850 for a continuation towards the $1,825 target.
- The US CPI is a critical event for the price of gold this week.
the price of gold was choppy during the American session, but decidedly bearish based on technical data and failing to recover even on weak US dollar. Gold price is currently trading at $1,850 and at the bottom of a new box that has formed in the massive sale on Friday. The yellow metal fell on Monday on a continuation of that move and from the daily high set in the Asian session at $1,866.59.
The US Consumer Price Index, key to the price of Gold
The price of gold is under pressure as investors brace for a very data-heavy week in the US, where we kick off on Tuesday, with what could be a strong 6.2% annualized Consumer Price Index, CPI, result. for the previous month. Combined with the unexpected January jobs report released earlier this month on non-farm payrolls (NFPs), this data could unleash a storm in markets that are otherwise running ahead of the Federal Reserve and They are valuing a picot for the end of the year.
Analysts at TD Securities explained that “core prices are likely to remain firm in January, up 0.4% m/m (matching the upwardly revised rise in December), as we expect the recent easing of deflation in goods come to an end”.
Safe haven inflation is likely to remain the main wild card, while the rebound in gasoline prices will be the main driver of non-core CPI prices. Our MoM forecasts point to a 6.2%/5.5% YoY rate for both core and total prices.”
However, the outlook for the Consumer Price Index (CPI) is mixed: some analysts expect a moderate result, while others anticipate a hawkish result.
For example, while some analysts anticipate a more benign outcome from the data, analysts at Brown Brothers Harriman argued that the rise in US Treasury yields of late (the US Treasury yield The 10-year US rose from Thursday’s low of 3.334% to a recent high of 3.755%), coinciding with renewed inflation concerns and a resumption of Fed tightening expectations.
WIRP suggests that the 25 basis point hikes on March 22 and May 3 are all but priced in, while the odds for a third hike in June or July are around 45%,” analysts say. As it may seem, the easing cycle is still expected to start in the fourth quarter, but we believe it will be corrected in the next phase of the Federal Reserve’s pricing review, which could come after the CPI data. , and the Producer Price Index, IPP, for this week”.
On the other side of the narrative, analysts at TD Securities said they were anticipating a subdued result that will be underscoring the prospects that the recent pain trade will begin to reverse.”
“The last correction in the dollar was inspired above all by extreme positioning and the short-term risk premium, which has also begun to correct itself,” they said. In addition, the strong jobs numbers made little dent in the Federal Reserve, which has helped reinforce the soft landing talk.”
The result is that if the CPI conforms to our forecasts this week, a new round of US sell-offs should start,” TD analysts said, paving the way for a bullish outlook for the euro, which is negatively correlated with US sales.
For her part, the governor spokeswoman for the Federal Reserve, Michelle Bowman, declared the following earlier in the week:
“I hope we continue to raise the fed funds rate because we have to get inflation back to our 2% target and to do that we need to better balance demand and supply,” Bowman said during an American Bankers Association conference in Florida.
Once at a sufficiently restrictive level, interest rates will have to be maintained for “some time” to restore price stability, he added.
Bowman concluded by stating that the strength of the labor market and the moderation of inflation make possible a “soft landing” for the economy.
Gold Technical Analysis
Breakouts in gold price structures have occurred in the last couple of days and the shorts are building up, penetrating deeper territory. However, a fix might occur:
The 50% gold price reversal is a resistance zone that could hold and lead to a continuation lower with $1,850 in the spotlight. This would protect a move towards the 1,000 pip cash target at $1,825 set in the previous gold price analysis:
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
