Jump to content
The Twitter Feeds are now back on the Platform ×

Gold Prices Coil Up For Breakout. Will US Inflation Data Be The Trigger?


MongiIG

Recommended Posts

GOLD PRICE OUTLOOK:

  • All eyes on US CPI report as gold prices take cues from real interest rates
  • Data beckoning a more hawkish Fed response may pressure bullion lower
  • Sellers might look for a close below $1778/oz for breakdown confirmation
Gold Prices Coil Up For Breakout. Will US Inflation Data Be The Trigger?

Gold prices began a structural advance in September 2018 as the pickup in economic growth from early 2016 peaked, marking the end of the Fed’s rate-hike cycle and driving a parallel drop in real interest rates. The non-yielding metal grows more attractive as a store of value for investors as the return on cash declines.

As it happened, real rates dropped to 0 percent by late 2019 and raced into negative territory at the onset of the Covid-19 pandemic as the Fed unleashed aggressive stimulus to prevent a credit crisis. Not surprisingly, this was drove bullion prices sharply higher.

The rise was capped in August 2020 as the US central bank signaled that it was done expanding its stimulus program. That changed the object of speculation from how policymakers might ease further to when tightening would commence. Appropriately enough, real yields found a bottom simultaneously.

Gold Prices Coil Up For Breakout. Will US Inflation Data Be The Trigger?

Gold price chart created using TradingView

Since then, a choppy range has prevailed as traders and policymakers alike attempt to divine next steps. The second half of 2021 marked a pointedly hawkish shift in Fed rhetoric as rapidly accelerating inflation appeared stickier than a mere ‘transitory’ by-product of recovery from Covid-triggered economic lockdowns.

Nominal yields have surged against this backdrop, but priced-in inflation expectations have grown faster and thereby kept real rates pinned in place. This has allowed gold to sustain store-of-value appeal and hold up even as it is unable to make further upside progress.

US CPI DATA IN FOCUS AS TRADERS WEIGH FED IMPACT ON REAL RATES

The spotlight now turns to December’s US CPI report. Core price growth is seen accelerating to 5.4 percent on-year, the fastest in 30 years. The headline number is seen hitting 7 percent on-year for the first time since 1982. Traders will be keen to weigh up any deviations as well as the make-up of the rise.

Leading ISM survey data suggests price pressures have eased in the manufacturing sector – consistent with other evidence suggesting supply chains are on the mend – while service-sector inflation remains near recent highs. That may speak to the stickiness of wage growth, revealed to be hotter than expected last week.

CPI data that underpins this narrative – that is, that the locking-in of brisk wage gains on the service side, the biggest part of the US economy, will keep inflation elevated – may beckon a sterner Fed. This might cap expectations for reflation to accelerate and boost nominal yields, lifting real rates at gold’s expense.

 

GOLD TECHNICAL ANALYSIS – COILING UP FOR A BREAKOUT?

Consolidation in a narrowing range below the 1834.14-49.64 zone continues. A break above this barrier’s upper boundary may expose resistance capped at 1877.15. Alternatively, a close below the January swing low at 1778.50 would break 5-month rising trend line. A test of support anchored at 1750.78 might follow.

Gold Prices Coil Up For Breakout. Will US Inflation Data Be The Trigger?

Gold price chart created using TradingView

GOLD TRADING RESOURCES

Written by Ilya Spivak, Head Strategist, APAC for DailyFX. 12th Jan 2022.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,696
    • Total Posts
      92,060
    • Total Members
      41,982
    • Most Online
      7,522
      10/06/21 13:53

    Newest Member
    mixer50x350
    Joined 01/04/23 00:31
  • Posts

    • Hello everyone, i am looking to hold shares long term Apple Tesla in a spreadbetting account just wounded if there is a calculation example Tesla $195.00 1 share = ? ponds per point spread bet. Thanks for any help
    • #USDCAD: Time For PullbackUSDCAD reached a key level.Testing that, the price broke and closed above the resistance line of a falling wedge pattern.I expect a pullback now.Goals: 1.355 / 1.3577  
    • Charting the Markets: 31 March The FTSE 100, DAX 40 and Nasdaq 100 surge higher on a positive outlook as EUR/USD, GBP/USD pause their ascents while USD/JPY continues to rise as the greenback appreciates. WTI remains capped by resistance, gold forms a technical triangle as Robusta coffee trades near six-month highs.   Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 31 March 2023                 This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
×
×
  • Create New...