gold prices have successfully held above the crucial $2,600 mark as traders begin to assess the broader economic landscape ahead of an important US Consumer Price Index (CPI) report. The rebound comes after a three-day decline that saw prices drop to their lowest levels in two months, hitting $2,590.
The recent fluctuations in gold prices appear linked to market reactions following the election victory of Donald Trump, whose economic policies are perceived to be inflationary. This has contributed to a strong performance of the US dollar and rising Treasury yields. With market sentiment favoring the dollar, gold — being a non-yielding asset — has faced pressure, as traders seek to capitalize on profits from short positions in gold and long positions in the dollar.
Investor focus is set to shift to the US CPI data being released later today, which will likely influence expectations regarding future actions of the Federal Reserve. Analysts predict that both the headline and core CPI figures for October will reflect annual increases, with estimates of 2.6% and 3.3%, respectively. A deviation from these expectations, particularly a lower-than-anticipated CPI, could reinforce dovish sentiments regarding interest rate cuts, while a stronger inflation reading might prompt a reassessment of future easing measures.
Looking ahead, the market’s reaction to the CPI data may be temporary. Attention will soon turn to Fed Chair Jerome Powell’s upcoming speech, as well as remarks from several regional Fed presidents throughout the day. On the technical front, gold will need to secure a foothold above $2,645 to bolster its recovery prospects. If the upward momentum continues, targets would include the previous day’s high of $2,627 and the resistance level at $2,670. Conversely, should inflation data surprise to the upside, gold prices could face downward pressure toward the 100-day Simple Moving Average around $2,541. Selling interest may be tempered at the $2,585 level, providing a critical battleground for buyers and sellers alike.
