Technical Analysis of Gold: Will the US CPI Release Break the Trade Range?

In the early Asian trading hours on Monday, the gold price (XAU/USD) oscillated within a narrow trading range of $2,020-$2,040. A significant increase in gold prices is unlikely given the uncertain future for interest rates. The Japanese market is closed for National Day, while the markets in Hong Kong, Singapore, and mainland China are closed for the Lunar New Year. The gold price is currently trading near $2,025, down 0.02% for the day.

Mixed Signals from the Fed:

The Federal Reserve (Fed) plays a key role in influencing gold prices. Last week, Fed Chair Jerome Powell expressed the desire for continued economic growth but warned that such strength could reignite inflation. Meanwhile, other Fed officials seem hesitant to act, preferring to wait and see if inflation naturally tapers off. This mixed messaging keeps gold traders on edge.

Data is Key:

All eyes are now on Tuesday’s release of the US January inflation data. If the Consumer Price Index (CPI) falls from December’s 3.4% to the predicted 3.0%, it could signal easing inflation and potentially open the door for the Fed to cut interest rates later. Lower rates generally boost gold prices, making the non-interest-bearing asset more attractive.

Geopolitical Turmoil Adds Spice:

The ongoing tensions in the Middle East, with Israel rejecting a ceasefire offer from Hamas, could temporarily boost. As a traditional safe-haven asset, gold tends to rise during periods of geopolitical uncertainty. However, this upside could be limited if the Chinese economy shows signs of further weakness. Recent data revealed a 15-year low in Chinese consumer prices, raising concerns about the health of the world’s second-largest economy.

Trading Opportunities Abound:

Gold traders will be closely monitoring upcoming economic data releases, including US Retail Sales on Thursday and Producer Price Index (PPI) on Friday. These reports can offer valuable insights into the health of the US economy and provide clues about the Fed’s future actions, ultimately impacting gold’s price trajectory.

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Disclaimer: Do not take this post to be financial advice; it is merely informational. Before deciding what to buy, please get the advice of a licensed financial expert.

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