Gold price hinges on the US CPI report

Gold Price news, and analysis

• The US dollar benefits from higher for longer Fed’s monetary policy
• The precious metal price faces key trading levels

The US dollar index has recently reached its highest levels in almost six months. This increase was driven by market expectations that the Federal Reserve would keep interest rates elevated for an extended period. Initially, there was an anticipation that the Fed might begin to cut rates by the first quarter of 2024. However, the market sentiment was shifted on hawkish statements from the Feds’ members, along with a resurgence in US inflation levels. Furthermore, the market even considers the possibility of the US central bank hiking rates once more before the end of 2023. The upcoming US inflation report of August will play a significant role in either solidifying the belief that the Fed could hike rates once more, potentially in November or might decide to hold off for further clarity from subsequent US inflation and job reports in the coming months.

On the other hand, gold prices have stabilized below $1950/oz primarily due to the strengthening of the US dollar. Gold traders will closely monitor the US inflation report of August, which is expected to show the headline consumer price index rising from 3.2% in July to 3.6% in August, driven by higher energy and food prices. However, the core consumer price index is anticipated to decline from 4.7% in July to 4.3% in August. Consequently, any data that exceeds expectations in both indicators will likely have a positive impact on the value of the US dollar and a negative impact on gold prices. Conversely, if the data falls short of expectations, it could result in a weaker US dollar and higher gold prices.

Gold Price Daily Chart

Chart source ADSS Platform

At the start of September, the gold price tested and failed to close above the bearish trendline originated from the May 4 high at 2081 and stabilized in the trading zone located between 1933-1911. Therefore, a break above the aforementioned trendline with a daily close above the high end of the zone at 1933 reflects a strong momentum to the upside and could send the price towards $1974/oz. Nonetheless, the resistance levels at 1949 and 1960 should be watched closely.

On the other hand, a daily close below the low end of the trading zone at 1911 may encourage traders to press even lower towards 1872. However, the support level located at 1890 should be kept in focus.