Asian Session Breather Precedes Crucial US Inflation Figures with Implications for Gold
As the gold price takes a brief respite in the Asian session on Tuesday, market attention is fixed on the upcoming release of the United States Consumer Price Index (CPI) data. Following two consecutive days of decline, gold traders are anticipating fresh directional cues from the crucial inflation figures, set to shape market sentiment for the week. The subsequent focus will shift to the United States Federal Reserve (Fed) interest rate decision.
Gold Price: Anticipation Builds Ahead of US CPI Data
In the lead-up to the US CPI data release, analysts forecast a 3.1% annual increase in November, a slight dip from the previous month’s 3.2%. The Core CPI is expected to remain steady at 4.0% year-on-year. Monthly projections suggest a marginal uptick in the headline US CPI inflation to 0.1%, while the Core figure is set to rise to 0.3% in November, up from 0.2% in October.
The gold market is poised to react to the US Dollar’s response and yield dynamics following the inflation data. A higher-than-expected CPI could trigger renewed buying interest in the US Dollar and Treasury bond yields, potentially signaling the Fed’s commitment to maintaining higher interest rates to combat inflation.
Conversely, a slowdown in the pace of US CPI acceleration might fuel expectations of a Fed rate cut, placing downward pressure on the US Dollar and bond yields. Consequently, gold prices will be influenced by these dynamics, offering traders fresh incentives.
Despite a tepid recovery attempt from three-week lows, the gold price remains below the $1,990 barrier, with the US Dollar Index consolidating near three-week highs. Market participants are engaging in cautious repositioning ahead of Wednesday’s Federal Reserve policy announcements.
Technical Analysis Highlights Key Levels
On the technical front, the daily chart indicates that gold closed below the 14-day Simple Moving Average (SMA) at $2,006. The breakdown from the ascending trendline support of $2,024 on Friday further underscores potential bearish sentiment.
The 14-day Relative Strength Index (RSI) hovers below the 50 level, indicating a lack of strong upward momentum. The immediate support is identified near the $1,965 area, marked by the November 20 low and the 50-day SMA.
Gold sellers eyeing further declines may face challenges at the flattish 200-day SMA at $1,952 and the 100-day SMA at $1,941. Conversely, a recovery requires a daily close above the 21-day SMA at $2,006, with targets set at the November 27 high of $2,018, heading towards the $2,040 supply zone.