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10 Jan 2024

Gold Price Forecast: XAU/USD retreats ahead of US CPI release

  • Gold's drop influenced by heightened anticipation of US inflation report and rising Treasury yields.
  • Expectations of higher headline CPI and a decline in core CPI shape market sentiment, impacting Gold's value.
  • Upcoming US CPI data crucial for market expectations around Fed's rate decisions and its impact on Gold prices.

Gold price dropped 0.33% late in the North American session as traders awaited Thursday's release of the latest inflation report in the United States (US). Expectations that headline inflation would exceed the previous month’s reading remain high, as witnessed by the rise of US bond yields. The XAU/USD trades at $2021.22 after hitting a daily high of $2040.27.

XAU/USD drops influenced by elevated US bonds yields as traders brace for US inflation report

Market sentiment shifted positively, though US Treasury bond yields remained high, particularly the 10-year benchmark note rate, up two basis points at 4.034%. That’s weighing on Gold despite the weak US Dollar (USD).

The economic docket on Wednesday was scarce with the release of Wholesale Inventories slipping 0.2% as expected by economists, a minuscule improvement compared to October’s -0.3% plunge. Aside from this, traders are bracing for the release of the latest Consumer Price Index (CPI) figures in the US. Headline CPI is expected at 3.3% in 12 months to date data, while core CPI is projected to dive to 3.8%, according to the consensus.

Speculators expect the data as they seem convinced that the US Federal Reserve (Fed) would slash rates by close to 150 basis points toward the year’s end after Fed Chairman Jerome Powell and Co. commented rates are near peaking. Therefore, softer-than-expected US CPI readings could be positive for XAUs and negative for the Greenback, as US Treasury bond yields would be expected to drop.

On the other hand, if US inflation picks up, it would catch traders off guard, as they are highly positioned for a dovish Fed.

Ahead of the day, the New York Fed President John Williams would cross wires at around 19:00 GMT.

XAU/USD Price Analysis: Technical outlook

Gold’s daily chart portrays the yellow metal as neutral biased due to buyers' inability to crack the latest cycle high witnessed on December 28 at $2088.48. In the short-term, XAU/USD has shifted slightly bearish, and if sellers push prices below the 50-day moving average (DMA) of $2015.39, that will exacerbate a drop to challenge the $2000 mark. Otherwise, if buyers move in and lift prices above $2050, that could pave the way for testing the abovementioned cycle high around $2090 before regaining $2100.

XAU/USD Price Action – Daily Chart

 

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Silver price slumps late in the North American session as high US Treasury bond yields hit precious metals prices across the board.
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