Gold Prices Forecast: Edging Higher but Rangebound as Traders Eye US CPI Report

Key Points

• Gold’s cautious rise amid CPI anticipation.
• Dollar gains, higher yields pressure gold.
• Gold outlook hinges on CPI data, rate cut chances.

Gold Market Watch

Gold (XAU/USD) prices are cautiously edging higher, trading within Monday’s range as market players await the U.S. consumer price index (CPI) report. This week’s low trading volume suggests that major investors are holding off on significant moves until the CPI data is released.

Dollar Strength and Treasury Yields

The gold market faces headwinds from a firmer U.S. dollar and elevated treasury yields. The dollar index has gained 1.2% this month, affecting gold prices, as a stronger dollar typically diminishes the appeal of gold. Concurrently, yields on 10-year U.S. Treasury notes have risen to 4.0264%, influencing investor sentiment.

Impact of U.S. Inflation Report

Traders are keenly focused on the upcoming U.S. CPI report, which is expected to show a 0.2% rise in headline inflation for December and a 3.2% increase annually. Any unexpected softness in these figures could benefit gold prices, as lower inflation might prompt the Federal Reserve to consider a rate cut.

Rate Cut Expectations

Market participants are currently pricing in a 66% chance of a U.S. rate cut in March, based on the CME FedWatch tool. Lower interest rates typically reduce the opportunity cost of holding non-yielding bullion, making gold more attractive to investors.

Short-Term Forecast

Given these factors, the short-term outlook for gold is cautiously bullish. The impending CPI report and its potential impact on the Fed’s rate cut trajectory are pivotal. While a stronger dollar and higher yields present challenges, any indication of softer inflation could bolster gold prices, especially if it leads to a shift in interest rate expectations. Traders should closely monitor the CPI data and subsequent Fed reactions to gauge gold’s near-term direction.

Technical Analysis

Gold (XAU/USD) is trading at $2035.34, positioned above the key moving averages of $1962.91 for the 200-day and $2012.90 for the 50-day, indicating a bullish market sentiment.

The current price hovers near a support cluster between $2012.90 and $2009.00, which could provide a foundation for further upward momentum. Breaking above the minor resistance at $2067.00 may open the path towards the main resistance at $2149.00. Conversely, a move below the support cluster might test the main support at $1952.21.

The market’s current stance, trading above significant moving averages and near the support cluster, suggests a bullish outlook with potential for upward movement within the established resistance levels.