Price of Gold Fundamental Daily Forecast – Direction Comes Down to Headline Versus Core Inflation Data

Gold futures are inching lower early Friday as U.S. Treasury yields and the U.S. Dollar remain firm amid rising bets the Federal Reserve will resort to aggressive rate hikes to rein in inflation.

This thought is being driven ahead of today’s U.S. inflation data which could provide clues on the future of the Federal Reserve’s monetary policy. Traders are especially waiting for confirmation that decades-high inflation peaked in March. However, there are some skeptics who believe this is not likely because of the surge in crude oil and gasoline prices.

At 05:28 GMT, August Comex gold is trading $1846.90, down $5.90 or -0.32%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $172.22, down $0.56 or -0.32%.

Traders Anxiously Waiting US Consumer Inflation Data

The Labor Department’s Consumer Price Index (CPI), which tracks the cost to urban consumers of a basket of items, is expected to accelerate to 0.7% from 0.3%, when stripped of volatile food and energy products, it is seen cooling a nominal 0.1 percentage point to 0.5%.

Year on year, consensus has headline CPI holding steady at a blistering 8.3% and sees a “core” CPI print of 5.9%, which would mark a welcome 0.3 percentage point decline.

Robust CPI Reading Means More Aggressive Fed, Lower Prices

The market could probably handle a high CPI figure and a softer Core result, however, high numbers on both ends could mean the Fed will continue to raise rates more aggressively. This would put pressure on gold prices.

Technically Speaking …

Surprisingly, the short-term or main trend is up. However, the minor trend is down. With the main trend up, and the minor down, the price action has been mixed for a little over a week.

Essentially propping up the market this week has been the long-term Fibonacci level at $1844.00.

Holding above $1844.00 will give the market an upside bias. Sustaining a rally over a minor 50% level at $1854.80 will indicate the presence of buyers. This could trigger an acceleration to the upside on a breakout over $1862.40 with $1878.60 the next major target.

A sustained move under $1835.30 will be a sign of weakness. However, the trigger point for an acceleration to the downside is the main bottom at $1830.20. Taking out this level could lead to a near-term test of the support cluster at $1792.00 – $1787.80.