Gold prices posted nearly half percent fall yesterday, while since morning traded almost flat today. Prices took a steep fall as the dollar strengthened against its major counterparts before a key U.S. inflation reading due later in the day.
Yellow metal hit an over two-week low as markets positioned for a potentially stronger inflation reading, amid higher fuel prices and strong consumer spending.
The dollar came on demand as inflation reading will set the tone for a Federal Reserve meeting next week. Dollar index traded at 104.775 up 0.22% while benchmark 10-year Treasury yields remained within sight of a more than 20-year high.
The US economy is expected to face the wrath of strict monetary policy as the Fed is widely expected to keep interest rates higher for a longer period. US labor growth is stable but could come under pressure as firms are focusing on achieving efficiency by controlling costs. Apart from the inflation data, the Gold price would demonstrate a power-pack action after the interest rate decision by the European Central Bank (ECB) on Thursday.
The US headline CPI numbers will be released later today. Annual basis is foreseen to rise by 3.6% against July’s reading of 3.2%. Core CPI on monthly basis is foreseen at 0.2% unchanged against a month ago.
Monthly headline CPI is forecast to have expanded by 0.6% from 0.2%. A strong rebound in gasoline prices has triggered upside risks to headline inflation. Global Oil prices have rallied as much as 40% from May as OPEC sees rising demand for oil in the coming months.
An upside tick of inflation could create a chance of a final interest rate hike from the Federal Reserve (Fed) in the month of September.
Technical Outlook
Since the start of the month, gold prices retreated from the high 59665 and recently made a low 58523.00. Prices traded at 58617, almost flat today.
On the above chart, a symmetrical triangle pattern was found. Prices trading on the verge of trend line support at 58480.00. A break below will drag pressure in the prices, and it could drop nearly 1.5%-2.5% very soon.
Alternatively, failure of the break could create a probability for recovery and prices could retest 58800-59550 again.
Looking at the foretasted figures of CPI numbers, chances are downside more likely if the data will come above it. Alternatively, prices may rebound sharply if the numbers will stay below than forecast