Gold Price Forecast: Will XAU/USD defend 21-day SMA on US CPI inflation data?
- Gold price consolidates Tuesday’s 1% rally above $2,900 amid cautious markets.
- Traders cash in on their US Dollar short positions heading into the US inflation test.
- Gold price reclaims 21-day SMA at $2,910, with more upside likely on daily bullish RSI.
Gold price trades with caution above $2,900 early Wednesday as buyers take a breather weighing a global tariff war while gearing up for the highly-anticipated Consumer Price Index (CPI) from the United States (US) due later in the day.
Gold price looks to US inflation for a fresh boost
A typical cautious environment prevails heading into the US consumer inflation data publication, leaving Gold price gyrating in a narrow range. The US Dollar (USD) sees a short-covering rebound as traders opt to cash in on their positions following the recent downward spiral.
The renewed uptick in the USD and the US Treasury bond yields appear to check the Gold price recovery. Still, buyers could jump back into the game if the US annual headline and core CPI figures come in softer-than-expected, prompting the US Federal Reserve’s (Fed) to proceed with interest rate cuts this year. In such a scenario, the Greenback and the US Treasury bond yields will likely face fresh supply, boosting the non-interest-bearing Gold price.
However, Gold price could reverse the previous rebound and head further south in case the inflation data surprises markets to the upside. Unexpectedly hot CPI data could add credence to the Fed’s cautious outlook on inflation and rate cuts, weighing negatively on the yieldless Gold price.
In the meantime, US President Donald Trump-led tit-for-tat tariffs remain in the spotlight, affecting risk tone and the traditional store of value, Gold price. White House staff confirmed on Tuesday that a global 25% tariff on all steel and aluminium imported into the US would take effect on Wednesday.
Meanwhile, US Trade Secretary Peter Navarro said that “April 2nd we begin the process with reciprocity.”
In response, Canada’s Energy Minister Jonathan Wilkinson warned that the country would impose non-tariff measures, including restrictions on oil exports to US if trade tensions with Washington intensify further.
Markets also eagerly await the US-Russia peace talks on the Ukraine conflict due later on Wednesday, especially after Ukrainian President Volodymyr Zelensky agreed late Tuesday to a 30-day ceasefire proposed by the US if Russia accepts the plan, per CNN News.
Trade war and geopolitical risks remain at the centre of the market’s attention, which leave any impact on Gold price from the US inflation data short-lived.
Gold price technical analysis: Daily chart
Gold price managed to close Tuesday above the 21-day Simple Moving Average (SMA), now at $2,910, offering buyers a fresh hope for more upside.
The 14-day Relative Strength Index (RSI) stays firm above 50, justifying the bullish potential.
Should buyers sustain above the 21-day SMA at $2,910 following the US inflation prints, the February 26 high of $2,930 will be next on their radars.
Further up, Gold price will target an all-time high of $2,956, followed by the $2,970 round level.
If the selling pressure creeps in on hot US CPI data, immediate support is seen at the previous day’s low of $2,880.
Failure to resist above that level will open the door to testing the $2,850 psychological barrier.
Additional declines will likely challenge the $2,835 static support area.
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Mar 12, 2025 12:30
Frequency: Monthly
Consensus: 2.9%
Previous: 3%
Source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
