Gold prices remain practically unchanged following US CPI data

  • Gold prices spike up but remain little changed after the release of US CPI  data
  • All eyes are now on The Fed’s interest rate projections and Chairman Powell’s press conference.
  • Gold’s near-term bias remains negative, with hopes of Fed cuts ebbing.

Gold prices (XAU/USD) ticked higher on Tuesday following the release of the US Consumer Prices Index (CPI) report, which has triggered a cautious optimism ahead of  Wednesday’s Federal Reserve’s (FED) Monetary policy decision. 

The precious metal, however, remains practically flat on the day with bullish attempts capped below the $2,000 psychological level, and sellers contained at the $1,980 support area.

US Inflation has met the market expectations except for the monthly CPI, which remained flat in November, against the 0.1% increment foreseen by the market. The 3.1% yearly increase in the headline inflation and the 4% year-on-year core inflation do not change significantly the outlook for Wednesday’s Fed meeting.

The US Central Bank is widely expected to leave its benchmark interest rate on hold at the current 5.25%-5.5% band and put the focus on the interest rate projections for next year and on Fed Chairman Jerome Powell’s press conference. Investors will be looking for dovish hints on Powell’s comments to revive hopes of rate cuts in early 2024, which would give a fresh boost to Gold prices.

Daily Digest Market Movers: Gold remains little moved after US CPI data

  • US CPI has remained flat in November and increased 3.1% year on year. The core CPI remains steady at 4%, in line with the market consensus.
  • US Treasury yields have seen a moderately positive reaction, with the benchmark 10-year note increasing by 15 basis points after the CPI release.
  • US inflation data does not change the market's view on the Federal Reserve’s policy outlook. The market keeps pricing a 45% chance of Fed rate cuts in March, while the odds for a May rate cuts are evenly split, according to the CME Group FedWatch tool.
  • Gold prices have found some support on Tuesday after a two-day decline, favoured by softer US yields and a weaker US Dollar ahead as we head into Wednesday’s Fed monetary policy decision.
  • Geopolitical tensions continue growing amid news of attacks to the US troops in the Middle East by Iran-backed groups. This provides some support to precious metals on the back of their safe-haven status.

Technical Analysis: Gold remains on the defensive, with $1,980 support under pressure

The technical picture for Gold remains bearish, with upside attempts capped well below the $2,000 psychological level. Price action has broken below the main Simple Moving Averages (SMAs) in the 4-hour charts, which leaves the $1,980 support level under increasing bearish pressure.

The mentioned $1,980 is the neckline of a head and shoulders (H&S) pattern and the 50% Fibonacci retracement of the October - December rally. Below here, the next targets would be mid-November lows at $1,934, ahead of $1,838, and the measured target of the H&S pattern at $1,851.

A bullish reversal from current levels would have to breach the $2,000 level to ease negative pressure and shift the pair’s focus towards $2,035 and $2,075.


US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.

USD   -0.32% -0.15% -0.13% -0.36% -0.57% -0.41% -0.45%
EUR 0.32%   0.19% 0.21% -0.04% -0.28% -0.10% -0.15%
GBP 0.15% -0.18%   0.03% -0.23% -0.44% -0.27% -0.33%
CAD 0.11% -0.18% -0.01%   -0.22% -0.47% -0.31% -0.35%
AUD 0.36% 0.05% 0.22% 0.25%   -0.24% -0.06% -0.12%
JPY 0.56% 0.24% 0.42% 0.45% 0.22%   0.13% 0.11%
NZD 0.40% 0.11% 0.28% 0.30% 0.06% -0.18%   -0.05%
CHF 0.45% 0.15% 0.33% 0.36% 0.11% -0.13% 0.05%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).


Economic Indicator

United States 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: 12/12/2023 13:30:00 GMT

Frequency: Monthly

Source: US Bureau of Labor Statistics

Why it matters to traders

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.

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