Price of Gold Fundamental Daily Forecast – Seeing Position-Squaring Bump Ahead of Wednesday’s CPI Report

Gold futures are trading higher on Tuesday as traders took profits and squared positions ahead of Wednesday’s U.S. consumer inflation (CPI) report. Traders also found value following Monday’s steep plunge. Oversold conditions could also be contributing to the early strength due to the size of the three day break.

If the data is right, the sell-off the market experienced on Friday and early Monday was fueled by sell-stops and long liquidation, and not a whole lot of short-selling.

Professionals recognize the possibility of a bear market developing due to the potential change in policy by the Federal Reserve, but they are not accustomed to chasing a market lower on bad news. This is why we expect to see new sellers on this current snapback rally.

At 11:10 GMT, December Comex gold is trading $1732.10, up $5.60 or +0.32%.

Outlook Bearish Ahead of Consumer Inflation Reports

Since Friday’s labor market report the prospect of the Fed’s reduced bond-buying has pushed down U.S. bond prices, lifting their yields and strengthening demand for the U.S. Dollar. The stronger greenback is weighing on demand for dollar-denominated gold.

On Monday, the dollar was underpinned as U.S. Treasury yields spiked to three-week highs as surprising strong job openings on top of better-than-expected employment gains in July added to the narrative of an improving labor market.

U.S. job openings, a measure of labor demand, shot up by 590,000 to a record-high 10.1 million on the last day of June, the U.S. Labor Department reported in its monthly Job Openings and Labor Turnover Survey (JOLTS).

That followed Friday’s Non-Farm Payrolls report showing jobs increased by 943,000 in July, above the 870,000 forecast by economists in a Reuters poll.

Short-Term Outlook Bearish as Fed Speakers Present Tapering Ideas

Atlanta Federal Reserve Bank President Raphael Bostic, the first Fed speaker after the jobs data was released, said on Monday he is eyeing the fourth quarter for the start of a bond-purchase taper but is open to an even earlier move if the job market keeps up its recent torrid pace of improvement, Reuters reported.

Boston Federal Reserve Bank President Eric Rosengren was equally forthright, saying that the U.S. central bank should announce in September that it will start reducing its $120 billion in monthly purchases of Treasury and mortgage bonds in the fall, according to Reuters.

Daily Forecast

Although the trend is down, it’s not advised to trade the market as if it will go down forever. We saw that on Monday when the market rebounded close to $80 after hitting its lowest level since April 2020.

With the trend down and the fundamentals turning a little more bearish, the best advice at this time is to look for sellers on rallies.

The short-term range is $1837.50 to $1677.90. Its 50% to 61.8% retracement zone at $1757.70 to $1776.50 is a potential upside target and resistance zone. Since the trend is down, we’re looking for the bears to defend this zone.