Price of Gold Fundamental Daily Forecast – Jump in CPI Could Create Momentum to Fuel Breakout Over $1794.30

Gold futures are trading higher on Friday after reversing earlier weakness. The catalyst behind the rebound is the news that inflation accelerated at its fastest pace since 1982 in November, putting pressure on the economic recovery and raising the stakes for the Federal Reserve.

Treasury yields firmed on the news and the U.S. Dollar held steady, suggesting the move in gold was a knee-jerk reaction to the jump in inflation. Gains could be limited because the rise in consumer prices likely moved the Fed closer to an interest rate hike.

At 13:50 GMT, February Comex gold is trading $1779.90, up $3.20 or +0.18%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $165.87, down $1.03 or -0.62%.

We won’t be totally surprised if gold puts up strong numbers today since a high inflation figure, faster tapering from the Fed and an early rate hike had been baked into the market for weeks. We could see the development of a “sell the rumor, buy the fact” situation.

Technically, the trigger point for an acceleration to the upside is $1794.30. Taking out this level with strong volume could trigger a surge into $1819.30 to $1822.10.

Inflation Surges in November

The consumer price index, which measures the cost of a wide-ranging basket of goods, rose 0.8% for the month, good for a 6.8% pace on a year over year basis and the fastest rate since June 1982.

Excluding food and energy prices, so-called core CPI was up 0.5% for the month and 4.9% from a year ago, which itself was the sharpest pickup since mid-1991.

The Dow Jones estimate was for a 6.7% annual gain for headline CPI and 4.9% for core.

Treasury Yields Add to Gains on Week Following Hot Inflation Report

U.S. Treasury yields added to their weekly gains Friday after a hotter-than-expected inflation data.

The yield on the benchmark 10-year Treasury note gained 2.1 basis points, rising to 1.508%. The yield on the 30-year Treasury bond rose 1.7 basis points at 1.883%.

Daily Forecast

With the release of the strong inflation data, the Fed is now widely expected to double the tapering of its asset purchases to $30 billion a month, likely starting in January. That would enable the Fed to start raising interest rates as soon as next spring.

Gold could soar on a breakout over $1794.30 since inflation is likely to surge again in December and the Fed is not expected to boost the pace of tapering until January and raise rates until June.

Gains could be limited if U.S. Treasury yields continue to rise.