Gold price climbs back closer to all-time peak, bulls retain control ahead of US CPI report

09/11/2024 07:12:30 GMT|ByHaresh Menghani

Gold price climbs to a fresh weekly top and draws support from a combination of factors.
The cautious market mood benefits the safe-haven XAU/USD amid renewed USD selling.
Bulls might refrain from placing fresh bets ahead of the release of the crucial US CPI report.

Gold price (XAU/USD) prolongs this week's move up from the $2,485 region and gains some follow-through positive traction for the third successive day on Wednesday. The steady ascent extends through the early part of the European session and lifts the commodity to a fresh weekly top, with bulls now looking to build on the momentum beyond the $2,525-2,526 supply zone. The US Dollar (USD) struggles to capitalize on its gains registered over the past three days and retreats from the vicinity of the monthly peak amid dovish Federal Reserve (Fed) expectations. This, in turn, is seen as a key factor driving flows towards the non-yielding yellow metal.

Meanwhile, a generally weaker risk tone drives some haven flows and lifts the Gold price back closer to the all-time peak in the last hour. Bulls, however, might refrain from positioning for any further appreciating move and prefer to take a brief pause ahead of the release of the latest US consumer inflation figures. The crucial US Consumer Price Index (CPI) report will play a key role in influencing market expectations about the size of the Fed rate cut move in September and determine the next leg of a directional move for the precious metal. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the XAU/USD is to the upside.

Daily Digest Market Movers: Gold price continues scaling higher as traders start positioning for US CPI

Asian stocks were off to a shaky start on Wednesday as investors gear up for the crucial US inflation data, which, in turn, drives some haven flows towards the Gold price.
The headline US Consumer Price Index (CPI) is expected to have risen 0.2% in August and the yearly rate is seen decelerating from 2.9% to 2.6%, or the lowest since 2021.
Meanwhile, the core CPI, which excludes volatile food and energy prices, is anticipated to come in at 0.2% and hold steady at a 3.2% YoY rate during the reported month.
Any further signs of cooling inflation would increase market bets for a more aggressive policy easing by the Federal Reserve and bode well for the non-yielding yellow metal.
In contrast, the reaction to a stronger CPI print is more likely to be limited as investors seem convinced that the US central bank will start lowering borrowing costs in September.
According to the CME FedWatch Tool, the markets are currently pricing in a 67% chance of a 25-basis-points rate cut at the next FOMC policy meeting on September 17-18.
Meanwhile, the first debate between Democratic Vice President Kamala Harris and Republican Presidential candidate Donald Trump did little to impact the market sentiment.

Technical Outlook: Gold price seems poised to appreciating further above the $2,525-2,526 supply zone

From a technical perspective, any subsequent move up might continue to confront some resistance near the $2,525-2,526 supply zone. The said area marks the top boundary of a multi-week-old trading range and should act as a key pivotal point. Some follow-through buying, leading to a subsequent strength beyond the $2,532 area or the all-time peak, will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone, the Gold price might then resume its recent well-established uptrend.

On the flip side, the $2,500 psychological mark now seems to protect the immediate downside ahead of the $2,485 area and the $2,470 horizontal zone. The latter represents the trading range support, which if broken decisively might prompt some technical selling and pave the way for deeper losses. The Gold price might then accelerate the fall towards the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,450-2,449 area, before eventually dropping to sub-$2,400 levels, or the 100-day SMA.

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

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