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Price of Gold Fundamental Daily Forecast – Rangebound as Traders Deal with CPI Report, Omicron and Fed

By:
James Hyerczyk
Published: Dec 9, 2021, 09:59 UTC

Throughout the week, the headlines have created both optimism and worry. Both point toward headline risk.

Comex Gold

In this article:

Gold futures are inching lower on Thursday as major investors remained on the sidelines ahead of Friday’s U.S. consumer inflation report. Uncertainty over the Omicron coronavirus variant is also weighing on trading volume. Meanwhile, the mixed trade in U.S. Treasurys and the U.S. Dollar is encouraging investors to square positions while they await next week’s major Fed policy decisions.

At 09:19 GMT, February Comex gold futures are trading $1783.80, down $1.70 or -0.10%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $166.87, up $0.06 or +0.04%.

Traders Eyeing US Consumer Price Index

Gold traders remain focused on Friday’s U.S. Consumer Price Index (CPI) report that may influence the timeline of the Fed’s tapering of economic support before its next policy meeting on December 14-15.

Reduced tapering and interest rate hikes tend to push government bond yields higher, raising the opportunity cost of holding gold, which bears no interest.

In November, gold prices rose sharply as a surge in U.S. consumer prices the month before deepened fears that high inflation is here to stay amid supply chain snarls.

The Labor Department’s report also showed that in the 12 months through October the consumer price index (CPI) increased 6.2%, the largest year-on-year advance since November 1990.

Friday’s report is expected to show monthly CPI rose 0.7%, down from October’s 0.9% jump. Monthly Core CPI is expected to show a gain of 0.5%, down from its October 0.6% rise.

‘Virus-On, Virus-Off’ Headlines Confusing Gold Traders

The current low-volume, rangebound trade in gold suggests investor indecision and uncertainty. And who can blame them? The headlines have been confusing.

Throughout the week, the headlines have created both optimism and worry. Both point toward headline risk. This ‘virus-on, virus-off’ scenario is helping to generate the sideways trade.

This week the headlines said optimism in early data hinted the omicron variant of the new coronavirus may not be as bad as feared. Yet the U.K. announced new COVID-19 restrictions. Furthermore, there is now new talk that a fourth vaccination may be necessary.

Until there is clarity over the impact of Omicron, the headlines may hold prices in a range. That is, of course, until the Fed announcements next week.

Short-Term Outlook

Besides investor indecision, a tight trading range also indicates impending volatility. It’s probably best to keep your power dry until we get more definitive information about Omicron. This because the Fed may base its decision on a faster tapering on whether the new COVID-19 variant impacts the economy or not.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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