Gold came under pressure again as another jump in oil prices kept inflation worries and hawkish expectations alive. The focus today is on the US CPI report, particularly the core m/m figure.
Gold was hit again by a jump in oil prices, with WTI reaching a new weekly high yesterday. The focus today is on the US CPI report.
Oil stays supported by Middle East and Russia risks
The Houthis are intensifying attacks on Saudi Arabia, which renews supply disruption risks. Negotiations between the US and Iran remain at a stalemate.
Meanwhile, there is no energy ceasefire between Russia and Ukraine, as Russia reportedly struck an oil facility in western Ukraine. The Middle East crisis and the lack of relief from the Russian front have kept oil prices supported and limited the upside in gold, because of persistent inflationary pressures and hawkish expectations.
Traders wait on US CPI for rate hike odds
Today, the focus is on the core m/m measure of the US CPI, because Fed members have been watching the monthly pace of core inflation to judge how many rate hikes are needed and how quickly to tighten policy.
Probabilities for a rate hike in October sit around 21%, as traders wait for the CPI data to rule out a hike at the upcoming meeting despite pushback from Fed members.
In the author's view, an uptick to 0.3% might not be enough for the market to fully expect a hike in October, but a jump to 0.4% should do it. In that case, a selloff in gold on a hawkish repricing is likely. An in-line or lower figure could instead bring a short-term relief rally.
Gold technical levels to watch
The daily chart shows gold could not reach the downward trendline and rolled over. Sellers will likely target a drop into the 3,885 level, while buyers want a break higher to rally toward 4,500 first and then 4,700.
Looking at the 4 hour chart, the 4,110 level could still act as support, with the 4,228 resistance as the upside target for buyers.
The analysis advises waiting for the US CPI, because surprises could trigger big moves and make technical levels useless. Tomorrow brings the US PPI, the US Retail Sales and the latest US Jobless Claims figures.
Source: investingLive
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