Gold hovers around $4,600 early Tuesday, as buyers take a breather ahead of US CPI data.
The US Dollar holds its recovery amid the Fed’s independence concerns, receding rate cut bets.
Technically, Gold remains a ‘buy-the-dips’ trade, with RSI still flirting with the overbought region.
Gold is treading water near the $4,600 threshold early Tuesday, as buyers catch a breather after Monday’s rally to fresh record highs of $4,630. All eyes now turn to the US CPI inflation data due later in the North American Session for fresh trading impetus.
Amidst concerns over the US Fed independence and escalating geopolitical tensions between the US and Iran, the sentiment surrounding Gold remains bullish.However, traders resort to repositioning and take profits off the table heading into the crucial US CPI release later in the day.
The US Core Consumer Price Index is expected to rise by 2.7% on an annual basis in December. The monthly core CPI is set to increase by 0.3% in the same period after reporting a 0.2% growth in November. Meanwhile, the headline CPI inflation is expected to hold steady at 2.7%.
Inflation in the US remains well above the Fed’s target of 2%, and hence the data holds utmost importance in gauging whether the Fed will push back interest rate cuts into the second half of this year.
Hotter-than-expected US annual headline and core CPI readings could price out a Fed rate cut in the first quarter, providing legs to the ongoing US Dollar recovery while fuelling a Gold price correction toward $4,480 initial demand area.
On the other hand, a surprise downtick in the inflation data would revive bets for a rate reduction in the March or April Fed policy meeting. In such a case, the USD could see a fresh leg lower, driving Gold to fresh record highs toward $4,700.
However, any reaction to the US CPI data could be short-lived in the face of geopolitical developments and worries over the Fed’s autonomy, which will remain key drivers affecting Gold in the coming days.
Daily technical analysis
In the daily chart, XAU/USD trades at $4,594.62. The 21-day SMA climbs above the 50-, 100- and 200-day SMAs, signaling firm bullish momentum, and price holds above all of them to reinforce a positive tone. The 14-day Relative Strength Index stands at 70.17 (overbought), which could usher a pause or shallow pullback. The 21-day SMA at $4,417.93 offers immediate dynamic support, with the advance intact while above it.
Longer-term SMAs continue to rise, with the 50-day above the 100- and 200-day ones, underscoring buyers’ control as the uptrend extends. The pair trades comfortably above the 50-day SMA, maintaining an upward structure. The 50-day SMA at $4,255.76 serves as secondary support, while a drop through it would expose the 100-day SMA at $4,044.74. As long as price holds above these supports, dips would remain shallow and the path of least resistance would point higher.
Will US CPI data fuel another GOLD record rally?
Gold is treading water near the $4,600 threshold early Tuesday, as buyers catch a breather after Monday’s rally to fresh record highs of $4,630. All eyes now turn to the US CPI inflation data due later in the North American Session for fresh trading impetus.
Amidst concerns over the US Fed independence and escalating geopolitical tensions between the US and Iran, the sentiment surrounding Gold remains bullish.However, traders resort to repositioning and take profits off the table heading into the crucial US CPI release later in the day.
The US Core Consumer Price Index is expected to rise by 2.7% on an annual basis in December. The monthly core CPI is set to increase by 0.3% in the same period after reporting a 0.2% growth in November. Meanwhile, the headline CPI inflation is expected to hold steady at 2.7%.
Inflation in the US remains well above the Fed’s target of 2%, and hence the data holds utmost importance in gauging whether the Fed will push back interest rate cuts into the second half of this year.
Hotter-than-expected US annual headline and core CPI readings could price out a Fed rate cut in the first quarter, providing legs to the ongoing US Dollar recovery while fuelling a Gold price correction toward $4,480 initial demand area.
On the other hand, a surprise downtick in the inflation data would revive bets for a rate reduction in the March or April Fed policy meeting. In such a case, the USD could see a fresh leg lower, driving Gold to fresh record highs toward $4,700.
However, any reaction to the US CPI data could be short-lived in the face of geopolitical developments and worries over the Fed’s autonomy, which will remain key drivers affecting Gold in the coming days.
Daily technical analysis
In the daily chart, XAU/USD trades at $4,594.62. The 21-day SMA climbs above the 50-, 100- and 200-day SMAs, signaling firm bullish momentum, and price holds above all of them to reinforce a positive tone. The 14-day Relative Strength Index stands at 70.17 (overbought), which could usher a pause or shallow pullback. The 21-day SMA at $4,417.93 offers immediate dynamic support, with the advance intact while above it.
Longer-term SMAs continue to rise, with the 50-day above the 100- and 200-day ones, underscoring buyers’ control as the uptrend extends. The pair trades comfortably above the 50-day SMA, maintaining an upward structure. The 50-day SMA at $4,255.76 serves as secondary support, while a drop through it would expose the 100-day SMA at $4,044.74. As long as price holds above these supports, dips would remain shallow and the path of least resistance would point higher.
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