Gold price is showing signs of a modest comeback, hovering around the $1,870 mark on Friday, as investors gauge the impact of the recent US inflation data on Federal Reserve rate hike expectations. The price of gold, after hitting a two-week high of $1,885, encountered resistance as the US Dollar gained momentum following the CPI report, subsequently exerting downward pressure on the precious metal.
Market sentiments were initially lifted after the US Consumer Price Index (CPI) data indicated a persistent rise in inflation, bolstering the Fed’s stance on extended interest rate hikes. However, the greenback’s retreat on Friday suggests a nuanced market sentiment, influenced by the softening Chinese Consumer Price Index (CPI) and Producer Price Index (PPI) data.
With the market focus now shifting to the US Preliminary UoM Consumer Sentiment and Inflation Expectations data, along with upcoming speeches by Fed policymakers, investors are closely monitoring the gold market’s behavior around the crucial 21-Daily Moving Average (DMA) at $1,878 for a potential bullish confirmation.
Gold’s recent struggle to secure a weekly close above the 21 DMA has heightened concerns among traders, potentially paving the way for a downward trend towards the $1,859 and $1,850 support levels. On the flip side, a sustained breach of the 21 DMA could signal a bullish reversal, prompting a target of $1,900, with the 50 DMA posing as a mild obstacle. Additionally, a formidable challenge awaits at the $1,925 level, where the 100 and 200 DMAs converge.
Market participants are treading cautiously, considering the broader implications of the Fed’s policy stance and the global economic outlook. The ongoing dynamics of the gold market are likely to be influenced by a mix of global macroeconomic factors, underscoring the need for strategic positioning and an attentive approach by investors in the days ahead.