gold prices are recovering robustly, approaching two-week highs just above $2,700. This upward momentum is closely tied to the impending release of the US Consumer Price Index (CPI) data, which is expected to influence the US Federal Reserve’s monetary policy decisions early next year.
As the market anticipates the CPI report, there is a significant belief, around 86%, that the Federal Reserve will announce a 25 basis points cut in interest rates at their next meeting. Looking ahead to January, the probability of an additional 25 basis points reduction stands at 22%. The upcoming inflation data will play a crucial role in shaping the Fed’s course, potentially altering both the value of the US Dollar and the appeal of gold as a non-yielding asset.
Analysts expect the US CPI to register an annual increase of 2.7% in November, up from 2.6% in October, with core inflation likely remaining steady at 3.3%. On a monthly basis, both the overall CPI and core CPI are projected to rise by 0.3%.
gold has shown strong recovery this week, rebounding from an eight-day low. Contributing factors include ongoing geopolitical tensions in the Middle East and increased gold purchases by the People’s Bank of China, which recently resumed buying after a six-month hiatus, acquiring 160,000 fine troy ounces in November. The recent instability in Syria has further prompted investors to seek refuge in gold .
Trading analysis indicates that gold has broken out of its previous consolidation pattern, having regained the 50-day Simple Moving Average (SMA) at $2,670. Indicators suggest the potential for further gains. If the CPI data is weaker than expected, there is a possibility that gold prices could reach the November 25 high of $2,721, with a key target of $2,750 in sight. Should prices rise above this figure, it may pave the way for testing the record high of $2,790. Conversely, a stronger CPI could pose challenges for gold , particularly if it drops below $2,670, with support levels around the 21-day SMA at $2,638 and the previous week’s low at $2,613.
