Gold Jumps as Weaker CPI Defends $4,000 Support

Gold Technical Analysis

The gold market jumped on Tuesday after the consumer price index numbers in the United States came in weaker than anticipated. The core CPI numbers came in at 0.0%, which was 0.2% less than anticipated, and with that, it makes a certain amount of sense that it caught the market off guard. By catching the market off guard, you have a scenario where the reaction is pretty quick, and it is also fortuitous that the market was at a large, round, psychologically significant figure in the form of $4,000, thereby adding to the drama. Market participants do tend to pay close attention to these big figures, and $4,000 has been massive support as of late.

Technical Signals and Geopolitical Headwinds

Looking at the chart, it is worth noting that we’ve recently seen the 50-day EMA break down below the 200-day EMA, which is what technical analysis calls a death cross. That death cross captures a lot of attention, and it is very negative in its meaning. Whether or not that actually ends up being an ominous sign remains to be seen, but we also have to worry about interest rates spiking again based on headlines coming out of the Middle East. That has been a major driver recently.

The $3,900 level seems to be the bottom of the support region, and if we were to break down below there, I might look to start shorting gold. In the meantime, though, I’m watching the $4,200 level above because that was a recent swing high, suggesting that maybe there’s a little bit of resistance in that neighborhood. All things being equal, despite the surprise coming out of the United States, it’s very possible that nothing has changed. We did basically wipe out the negative candle from the previous day, and now we’re just hanging around.

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