US CPI On Watch
Gold prices continue to hold just below record highs this week as traders brace for the latest US inflation data tomorrow. Increasingly dovish Fed expectations had seen gold prices trending higher over July and August before the market settled into a range over the last fortnight. Last week’s US jobs data proved unable to offer gold bulls the next advance with traders deeming the data not quite negative enough to fuel fresh USD downside. Instead, a subsequent rebound in the Dollar has kept gold prices curtailed over recent sessions. Looking ahead to tomorrow’s headline US data, there is plenty of two-way risk for gold.
Bullish Gold Risks
Looking at the market forecasts for tomorrow, Wall Street is calling for annualised inflation to fall to 2.6% last month, down from 2.9% in July. If seen, this should spark fresh selling in USD, allowing gold prices to move higher again. The market is currently grappling with the prospect of a deeper Fed cut this month (currently priced around 30%). If we see inflation undershoot forecasts tomorrow, this could be enough to drive that pricing above 50%, particularly given weak jobs data, which should see USD plumb fresh lows and gold trade firmly into new highs.
Bearish Gold Risks
On the other hand, if we see any stickiness in inflation around the prior reading, or a fresh uptick, this will dilute easing expectations. In this scenario, the prospect of a deeper September cut will fade, likely fuelling a short-covering rally in USD, pulling gold prices lower near-term.
Technical Views
Gold
The rally in gold has stalled for now into the 2,530.59-resistance level, with the bull channel highs also offering resistance here. While the 2,483.27 level underpins, however, focus remains on further upside and an eventual break higher. Below that level, focus will shift to 2,427.54 as the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.