Gold Price Prediction – Prices Slide on Strong CPI Data

Key Insights

• Gold prices moved lower.
• The dollar broke higher.
• Treasury yields surged higher on strong CPI data.

Gold prices moved lower in early trade in the North American trading session. A Strong greenback and higher yields weighed on the yellow metal. Since gold is quoted in dollars, a stronger dollar generates headwinds for the yellow metal. The headline and core CPI came in stronger than expected pushing the 2-year yields to a 13-year high.

The Labor Department reported on Friday that CPI rose 8.6% yearly, hotter than the 8.3% expected. This report shows that consumer inflation has been the strongest since 1981. While headline inflation remains strong due to energy and food prices, shelter and services are starting to slow.

Excluding volatile food and energy prices, core CPI was up 6%, slightly higher than the 5.9% estimate. Monthly, headline CPI was up 1% while core rose 0.6.

Technical Analysis

Gold prices slide through support resistance near the 200-day moving average at 1,842. The yellow metal support is now near the May lows at 1,786. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.

Medium-term momentum is flat. The  MACD (moving average convergence divergence) histogram has a decelerating trajectory pointing to consolidation.