Price of Gold Fundamental Daily Forecast – Downside Could Be Limited if Higher CPI Data Has Been Priced In

Gold futures are edging lower ahead of today’s U.S. consumer inflation report. The catalysts behind the weakness are rising Treasury yields and a firm U.S. Dollar. A stronger dollar pressures gold as the metal becomes expensive for buyers outside the United States, while higher returns on bonds increases the opportunity cost for holding non-yielding bullion.

At 09:12 GMT, June Comex gold futures are trading $1728.00, down $4.70 or -0.27%.

US Consumers Raise Outlook for Inflation, Labor Market:  NY Federal Reserve

U.S. consumers upped their inflation expectations again in March after steady gains in recent months, and became more optimistic about the labor market, according to a survey released Monday by the Federal Reserve Bank of New York.

The report offered the latest evidence that consumers expect inflation to rise in the near term as more Americans return to work and the U.S. economy heals from the crisis caused by the coronavirus pandemic.

After five months of steady increases, consumers’ short and medium-term inflation expectations are the highest they have been in nearly 7 years. Median expectations for how inflation will change over the next year and the next three years both increased slightly in March to 3.2% and 3.1%, respectively.

Expectations for how much more consumers expect to spend on homes, gas, and rent rose to the highest levels since the survey was launched in 2013.

Consumer surveyed by the New York Fed also raised their outlook for the labor market. The average expectation that the U.S. unemployment rate will be higher in one year dropped to 34.4% in March from 39.1% in February, reaching the lowest point since the pandemic started.

Daily Forecast

Sellers could continue to pressure gold prices on Tuesday if yields continue to rise. However, some investors think prices could stabilize and jump higher if consumer inflation comes in well above expectations.

The 10-year Treasury yield topped the 1.69% mark early Tuesday, ahead of the release of the key CPI report, due to come out shortly after the New York opening.

The March reading of the consumer price index is set to be released at 12:30 GMT. Economists polled by Dow Jones are projecting the headline index to rise by 0.5% month-over-month and 2.5% year-over-year.

Some traders feel that the gold market has priced in some kind of post-crisis normalization, in other words higher inflation, so prices could actually bounce higher even if the inflation number beats the forecast.

For a look at all of today’s economic events, check out our economic calendar.