Gold prices await US inflation data for direction; XAU/USD technical levels are crucial for near-term trading decisions.
Since the beginning of 2024, gold prices have remained in a holding pattern, fluctuating between technical barriers at approximately $2,065 and horizontal support at around $2,005. The bullish narrative has paused despite a more optimistic outlook a month ago, mainly because the Federal Reserve signaled a reluctance to initiate interest rate reductions.
The trajectory of interest rates remains a critical factor influencing precious metals, which lack dividend payments or yield incentives. The Federal Open Market Committee’s (FOMC) monetary policy decisions are poised to be the primary driver of market dynamics in the near term.
Faced with past disappointments and wary of complicating efforts to stabilize prices, the US central bank has resisted immediate rate cuts. Next week’s release of the consumer price index (CPI) report might validate this stance, potentially revealing limited progress toward disinflation.
Wall Street projections anticipate a moderation in January’s headline CPI to 3.1% year-over-year (y-o-y) from December’s 3.4% y-o-y. Conversely, the core CPI, indicative of long-term and underlying price trends, is expected to cool more gradually, easing to 3.8% y-o-y from the previous 3.9% y-o-y.
Gold Awaits US Inflation Data; XAU/USD Levels in Focus
Anticipating potential outcomes, an upside surprise in CPI figures, particularly in core metrics, will likely be bearish for gold. Such a scenario could prompt traders to temper dovish interest rate expectations, currently projecting 110 basis points of easing by year-end, consequently bolstering yields and the US dollar.
Conversely, lower-than-expected inflation readings could buoy the yellow metal. A significant miss may even spur market speculation about an imminent rate cut as soon as the March meeting. Such an event could lower US Treasury yields and the dollar, while risk assets may enjoy a favorable shift.
Regarding technical analysis, gold prices (XAU/USD) displayed subdued movement on Wednesday, consolidating around the 50-day simple moving average at $2,035. Market analysts anticipate that the ongoing consolidation phase will persist until prices break resistance at $2,065 or decisively drop below support at $2,005.
A breakout above resistance would shift attention to $2,085, potentially leading to renewed interest in the all-time high near $2,150. Conversely, a breach of support could trigger a pullback towards $1,990, with further losses prompting consideration of the 200-day simple moving average around $1,995.
With anticipation building around US inflation data, market participants await clarity on gold’s near-term trajectory, with key technical levels poised to guide trading decisions in the coming sessions.