Gold price has entered a flat phase, lingering just below $2,700, as it awaits fresh impetus from the US CPI report. The precious metal has experienced significant two-way price swings due to a complex web of factors and repositioning in anticipation of the crucial inflation data.
Bets on a less dovish Federal Reserve and the consequent rise in US bond yields have lent support to the US Dollar, thereby capping the upward movement of gold. The recent hawkish remarks from key Fed members, including Chair Jerome Powell, have stoked expectations that the Fed might be more cautious about rate cuts. This has led to an increase in Treasury bond yields for the second consecutive day on Tuesday and pushed the US Dollar to a four-day high. However, this has not managed to dampen the overall bullish sentiment surrounding gold entirely.
Geopolitical risks and trade war fears have emerged as countervailing forces, providing a floor for the safe-haven XAU/USD. Israel’s airstrikes in Syria and ground troop deployment, Ukraine’s plans for increased military funding and potential foreign troop deployment, and US President-elect Donald Trump’s tariff threats against major trading partners have all contributed to an environment of uncertainty. These geopolitical tensions and trade concerns have kept the demand for gold as a safe haven alive, making bearish bets on the metal a risky proposition.
The Bank of Canada’s expected rate cut today, along with likely similar moves by the European Central Bank and the Swiss National Bank on Thursday, is another factor that could potentially support the non-yielding gold price. The market is currently pricing in an over 85% probability of a 25-basis point rate cut by the Federal Reserve at its December policy meeting, according to the CME Group’s FedWatch Tool.
From a technical standpoint, gold’s breakout past the $2,650 – $2,655 supply zone earlier this week and the subsequent upward momentum have given bullish traders an edge. The oscillators on the daily chart are showing positive trends and are not yet in overbought territory, suggesting that the near-term outlook remains positive. This implies that any dips in price are likely to attract buyers near the recently breached resistance levels, with support expected to hold around the $2,630 area. A break below this level could see the price decline further towards the $2,600 mark.
Conversely, a sustained move above the $2,700 level could open the door for an advance towards the $2,720 – $2,722 supply zone. Beyond that, resistance near the $2,735 region awaits. If the price manages to clear this hurdle, it would signal the end of the recent corrective decline from the October all-time high and shift the market bias firmly in favor of the bulls. The momentum could then carry the gold price to the $2,758 – $2,760 barrier, and potentially towards the $2,770 – $2,772 region and the $2,790 area or even the record peak.
As the market awaits the US CPI report, all eyes are on how the inflation data will shape the Fed’s rate outlook and, in turn, provide the next significant directional cue for the gold price. The headline US CPI is anticipated to rise by 0.3% in November and 2.7% on a yearly basis, while the core gauge (excluding food and energy prices) is forecast to remain steady at the 3.3% YoY rate.
Related topics:
DXY: A Bearish Head and Shoulders Pattern in Focus
Mexican Peso’s Gains Trimmed Amid Inflation Data and Rate Expectations
Eurozone Investor Confidence Index Falls, EUR/USD Holds Upswing
