Gold price ahead of the US CPI report

Gold price news, and analysis

• The US dollar hinges on the US CPI report
• The precious metal price rebounds from key support level

This week, all eyes are on the highly anticipated release of US inflation levels, a critical factor influencing the Federal Reserve’s monetary policy. The US dollar has corrected its downward trend observed since the end of the previous year, driven partly by seasonal factors favouring the dollar in January. Additionally, the greenback benefited from a robust US jobs report for December, revealing a drop in unemployment to 3.7%, with over 200,000 jobs added, surpassing the expected 170,000, while average hourly ages YoY from 4% in November to 4.1% in December highlighting the continued resilience of the US labour market. This positive jobs data may encourage Fed policymakers to exercise patience in initiating interest rate cuts, potentially postponing the decision from March to the May meeting, especially given their satisfaction expressed in the minutes of the last session.

Looking ahead to this week’s inflation report, a further decline in inflation levels could be observed, influenced by relatively lower energy prices and favourable housing market data. Market expectations suggest a marginal increase in the consumer price index from 3.1% in November to 3.2% in December while investors expect the YoY core CPI to fall from 4% in November to 3.8% in December. Thus, any higher-than-expected data might reinforce the belief that Fed is likely to start its interest rate cut cycle by May. Conversely, any lower-than expected data may fuel speculation about interest rate cuts in the March meeting, potentially negatively impacting the US dollar but positively affecting gold prices.

Gold Price Daily Chart

Chart source ADSS Platform

On Dec 28, the metal rallied to a multi-week high at $2077/oz then U-turned indicating a weaker bullish momentum. Last week and this week, the price tested the support level located at 2025 however, the daily candlestick did not close below this level therefore, a daily close below 2025 could encourage traders to send the price towards 1974 however, the support levels located at 2009 and 2000 should be watched along the way.

On the other hand, any failure in closing below 2025 highlights a possible bullish comeback, in this scenario, bulls could push towards the Dec 28 high. That said, the resistance level at 2050 should be monitored.