Gold News: CPI Decides if Gold Clears $4,435.25 or Reverses Lower

Gold Rebounds Ahead of CPI as the Rate Trade Refuses to Die

Gold is back near its recent highs Wednesday because buyers are not ready to give up the rate-relief trade that started with the July payrolls miss. The metal hit a 10-week high Tuesday, failed to hold it and closed lower. That rejection did not produce sustained selling. Buyers came right back, which tells you the bid underneath gold is real as long as the market believes the Fed has a harder time justifying a September hike. The Consumer Price Index report landing Wednesday morning is the test of whether that belief survives.

At 10:07 GMT, Spot Gold (XAUUSD) was trading at $4,408.32, up $40.07 or 0.92%.

The rebound puts gold back within range of Tuesday’s high at $4,435.25, trading just below a key retracement level that has acted as the dividing line between buyers and sellers all week.

Crude Near $90 Is Complicating the Gold Bid

Brent is climbing toward $90. The Strait of Hormuz stays restricted. Houthi attacks are keeping the alternative routes under threat. That combination is working against gold buyers because every session crude holds these levels, the September hike argument gets harder to dismiss.

Gold rallied Tuesday morning. By the afternoon the metal was selling off. Oil held its gains through both sessions. Gold is not trading the war right now. It is trading what the war costs at the pump, and that cost keeps rising.

The Payrolls Miss Gave Gold a Bid but CPI Decides If It Keeps One

Gold posted its largest weekly gain since January after the July payrolls report showed weaker hiring than expected. September hike odds dropped from about 60% to near 50% and gold broke higher on the shift. That was enough to bring buyers back into a market that had already spent weeks correcting.

The problem is that 50% is not settled. Three policymakers voted for a rate increase at the last meeting. Chicago Fed President Austan Goolsbee made it clear this week that the Fed still has officials focused on inflation, not just labor-market weakness. One soft jobs report did not erase the hawkish side of the committee. It just made the doves louder for a few sessions.

Treasury yields are lower Wednesday with the 10-year near 4.66%, the two-year around 4.20% and the 30-year holding near 5.22%. That calm is the bond market waiting for the same number gold is waiting for.

Economists expect headline CPI to rise 0.1% for July with the annual rate at 3.4%. Core is expected at 0.2% monthly and 2.5% year-over-year. The entire rally from last week hangs on this number. Gold broke higher because the jobs data weakened the Fed’s hand. CPI either weakens it further or stiffens it, and the speed of the repricing around the September meeting will match how far the print lands from expectations. Producer prices follow Thursday, so the inflation argument does not end with one report.

Daily Spot Gold (XAUUSD) Technical Analysis

Spot gold is higher early Wednesday with the market trading inside yesterday’s range. The price action suggests investor indecision and impending volatility. This is typical of a market awaiting a major catalyst like today’s CPI report.

The market is currently testing a 50% level at $4,416.82. This is just below this week’s closing price reversal top at $4,435.25.

A sustained move over $4,416.82 will indicate the presence of buyers. Taking out $4,435.25 will negate the closing price reversal top and signal the resumption of the uptrend. This could trigger a surge into $4,481.78 and the 200-day moving average at $4,499.29. This is followed by a long-term Fibonacci level at $4,541.88.

The $4,481.78 level represents 20% down from the all-time high. Some traders consider this to be the level that started the bear market. The 200-day MA is also a big target. To go from crossing the 50-day MA at $4,148.11 to nearly testing the 200-day MA in five days is pretty impressive and it represents strong buying.

On the downside, a trade through yesterday’s low at $4,356.70 could trigger an acceleration to the downside. I only mention that because there is no support zone until $4,188.67 to $4,130.48.

What to Watch

Gold is higher Wednesday because the payrolls miss still carries weight and buyers came back after Tuesday’s rejection instead of letting the reversal run. CPI lands with crude near $90 already rebuilding the inflation case that the jobs report tried to close. The three hawks who voted for a hike at the last meeting have not gone anywhere, and Wednesday’s number decides whether the rest of the committee moves toward them or away.

The retracement level at $4,416.82 and Tuesday’s reversal high at $4,435.25 are the two levels defining direction. A push through both negates the reversal pattern and reopens the uptrend toward the 200-day moving average. A failure to hold the rebound and a break of Tuesday’s low at $4,356.70 leaves a wide gap with no support until well below $4,200.

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