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- Gold price rebounds from week lows at $1,850 as the US Dollar retreats.
- Hot United States Consumer Price Index could boost hawkish Federal Reserve bets.
- Gold price closed Monday below the 50-Daily Moving Average; more losses in the offing.
Gold bulls are coming up for the last dance on Tuesday, lifting Gold price from six-week lows of $1,850. Investors gear up for the main event risk of this week, the all-important United States Consumer Price Index data for January.
All eyes on the United States Consumer Price Index
The United States Consumer Price Index data has been the No.1 market mover over the past year. Its outcome holds the key to determining the US Federal Reserve’s next monetary policy move. For January, the annualized US Consumer Price Index is foreseen at 6.2%, down from 6.5% reported in December. The Core CPI is seen lower at 5.5% YoY in January vs. 5.7% previous. On a monthly basis, the American CPI is expected to jump to 0.5% in January vs. the previous revision of 0.1%. The Core CPI figure will likely steady at 0.4% in the reported period.
Yohay Elam, FXStreet’s Senior Analyst, explained: “I expect the Greenback to fall on an increase of 0.4% in CPI. It may also suffer an adverse “buy the rumor, sell the fact” response in response to a 0.5% read. It would take an unequivocally strong 0.6% figure to send the US Dollar up. A downbeat 0.3% figure or below would send it.”
A straightforward market reaction is expected on the US CPI data release. For the Gold price, a hotter-than-expected monthly figure is likely to spell trouble, as it would bolster hawkish Fed rate hike expectations. Markets are already pricing 25 basis points (bps) rate hikes in March and May. Hot US CPI data will likely push back expectations of a potential Federal Reserve rate cut this year. Money markets expect the Fed’s target rate to peak at 5.195% in July from a current range of 4.5% to 4.75%.
Gold price technical analysis: Daily chart
With a Bear Flag in play, Gold price yielded a daily closing below the critical 50-Daily Moving Average (DMA), now at $1,859.
At the time of writing, Gold buyers continue to defend the key $1,850 support area. The 14-day Relative Strength Index (RSI) remains flatlined below the 50.00 level, keeping the downside bias intact in the Gold price.
A hot US Consumer Price Index print could fuel a fresh downswing in the bright metal, breaking below the abovementioned support. Gold bears will target the January 5 low of $1,825 on sustained selling.
Should the US inflation data revive the dovish Federal Reserve outlook, Gold bulls will get a fresh life, motivating them to embark on a recovery toward the $1,870 supply zone.
The next upside target is envisioned at the February 9 high at $1,890. The 100 and 200-DMAs bullish crossover could help reduce the pain in the Gold price.
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