Gold has slipped back to the major $4,300 support level as surging oil prices push traders toward pricing in a September rate hike. The metal's next move now hinges on today's US Core CPI print, with a soft reading needed to keep buyers interested.
Oil surge drives gold lower
Gold's price action has been mostly negative since a strong US jobs report triggered a hawkish repricing, and a surge in oil prices has since added momentum to the selloff. Escalating attacks between the US and Iran, along with Yemen's Houthis targeting Saudi energy facilities, have pushed oil to new highs.
That momentum built further after Trump said he expects the war with Iran to end immediately after the US midterm elections in November, effectively signaling the conflict will likely continue through the election period.
CPI now the key catalyst
Yesterday, WTI crude oil broke through the $100 level for the first time since May, triggering a hawkish repricing in interest rate expectations across the board. Today's focus shifts to the Core CPI month-over-month measure, the figure Fed officials have been focusing on.
Fed's Waller had said he would consider a rate hike in September if the monthly core reading surprised to the upside, though that comment came before the latest surge in oil prices. Traders are now pricing a 67% chance of a rate hike at the upcoming meeting.
Levels to watch
On the daily chart, gold is trading at the 4,311 support level, where buyers could step in with a defined risk below the support to target a rally toward 4,890. Sellers, on the other hand, need a break lower to open the door toward 3,885 next.
The 4-hour chart shows a downward trendline defining the recent bearish structure. A pullback into that trendline could see sellers leaning on it to push toward new lows, while a break higher would let buyers build bullish bets toward the 4,890 level.
A soft Core CPI could trigger a pullback into the trendline or even push gold higher, while a hot print would likely trigger a sharp selloff as markets price an even more aggressive rate-hike path.
Source: Investinglive.com
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