Gold Prices Rise on Hot CPI

Gold prices continued to move higher despite the whipsaw movements in the dollar. U.S. yields moved higher across the interest rate curve following the hotter than expected U.S. consumer price index. The interest rate swaps curve is currently pricing 6-interest rate hikes in 2022. Additionally, jobless claims came in lower than expected, helping to flatten the yield curve to the lows seen during the pandemic.

Technical Analysis

Gold prices rallied slightly and remained rangebound. Prices remain above support near the 50-day moving average at 1,806. Resistance is seen near a downward sloping trend line that comes in near $1,856. Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is positive as the MACD (moving average convergence divergence) index has generated a crossover buy signal. This situation occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints in positive territory with an upward sloping trajectory pointing to higher prices.

CPI Rise More than Expected

U.S. Consumer inflation was more substantial than expected in January. According to the Bureau of Labor Statistics, the Consumer Price Index increased 0.6% in January compared to expectations that it would rise by 0.4% month over month. Annualized inflation was the hottest since 1982. CPI increased by 7.5% year over year compared to expectations that it would rise by 7.2%. Core inflation which strips out food and energy, increased by 6%, also the fastest rise in core inflation since 1982. The increase in inflation was driven by food, electricity, and shelter costs.