Gold Price Forecast: Rate Hike Risk Builds Ahead of US CPI

Gold Technical Analysis

The gold market is slightly negative here on Monday in thin holiday trading as the futures markets are closing early due to Labor Day in the United States. It will have taken quite a bit of volume out of the market.

That being said, there’s a lot of different things moving gold at the moment. Not the least of which would be reactions to the post-payroll repricing of the Fed. This continues to be an issue at the moment, and the overall attitude of traders involving the Fed and what it might do seems to be somewhat in flux.

Higher Interest Rates Pressure Gold

The jobs report on Friday was an addition of 156,000 jobs, and that was basically triple what was expected. This has rate-hike expectations up to about 60% for next week, and that is quite a bit different than it was. This is a driver that is being focused on by many at the moment.

Higher interest rates really punish non-yielding metals, and you are starting to see some hesitation. This all started not this past Friday, but the Friday before, with Kevin Warsh out at Jackson Hole talking in a very hawkish tone about the US economy.

The market is currently sitting just above the 50-day EMA and the 200-day EMA indicators, and that could cause a little bit of a push in here.

The critical event for this week, more likely than not, should be US CPI numbers. The Fed meeting next week is going to be the real show. But Treasury yields and Fed rate expectations are the real drivers of gold at the moment, which in the short term, remains fairly neutral.

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