Gold could start to decline once more toward $1,825 on the CPI. The price of gold is rising from 6 lows of $1,850 on Tuesday as the gold bulls prepare for the final. Traders prepare for this week’s primary event risk, which is the crucial release of the January USCPI data.

Gold Fundamental Overview

The US Consumer Price Index data has dominated market movement over the past year since its results are crucial in predicting the US Federal Reserve‘s upcoming change in monetary policy. The annualized US Consumer Price Index is projected to fall from the 6.5% reported in December to 6.2% in Jan.

In January, the core CPI is estimated to be 5.5% YoY, down from the previous quarter’s 5.7%. The American CPI is predicted to increase to 0.5% on a monthly basis in January from the previously revised 0.1%. The reporting period’s core CPI result is anticipated to remain constant at 0.4%.

On a 0.4% CPI increase, we anticipate a decline in the value of the dollar. Additionally, it can experience more hazards.

Gold banks of US CPI

A clear market reaction is anticipated in response to the release of the US CPI data, and for the price of gold.  A hotter-than-expected monthly figure is likely to signal disaster as it would support predictions for hawkish Fed rate hikes.

Strong US CPI figures are probably going to delay hopes for a possible Federal Reserve rate drop this year. From its present range of 4.5% to 4.75%.  The money markets anticipate that the Fed’s inflation target will peak at 5.195% in July.

Market Poll and opinion

Over the previous 24 hours, investors seem to have concentrated on a Federal Reserve Bank of New York survey on consumer anticipation. In Jan, it was estimated that the median expected rise in household income would fall by 1.3 percentage points to 3.3%.

Participants’ expectations for inflation, which are stable at 5%, are still for it to increase. This would indicate declining real incomes and further proof that individuals are deterred about outpacing inflation.

The Dow Jones, S&P 500, and Nasdaq 100 all finished higher as a result of the news. The tech industry performed well. From this vantage point, if people think wage increases may stall, that could be another indication that the economy may see more deflation. But there might also be a discussion about stagflation.

Rate increases of 25 basis points (bps) in March and May are already factored.

This is significant for gold since the US CPI report for January will be released in the next 24 hours. From 6.5%, headline inflation is predicted to decrease even more to 6.2% y/y.

The algorithm leans somewhat in direction of a negative surprise. Such a result might increase year-end Fed pivot betting. If this causes the US Dollar and bond yields to decline, gold may experience a profitable day.

NBF analysts predict “The energy portion likely recovered during the month. Contributing towards the headline index’s 0.5% increase. If our predictions are correct, the YoY rate should decrease from 6.5% to 6.2%.

Meanwhile, increasing rent costs may have persisted to boost the core index, which increased by 0.3% on a monthly basis. The 12-month rate would drop by three ticks, to 5.4%, as a result.

The US Consumer Price Index (CPI) has decreased, but the Federal Reserve (Fed) will maintain its hardline position given that it will take time for inflationary pressures to abate.

Technical Analysis of Gold

Gold broke below the 50-day Simple Moving Average on the graph. Although validation is still pending, the more negative movement. It would pave the way for an extension of the uptrend from November’s reversal.

If not, a move higher focuses attention on the 20-day SMA. The latter might continue to act as a barrier, keeping the short-term fall in mind.

Source: TradingView

  Gold Major Technical levels