Muhammad Umair, PhD
Gold Predictors
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The US CPI report is expected to significantly impact gold prices.
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A lower-than-expected CPI could reduce expectations for further Fed rate hikes, weakening the US Dollar and supporting gold prices.
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The gold market has declined recently but remains in an upward trend.
The US Consumer Price Index (CPI) report is expected to show a 2.3% year-on-year increase for September. This increment has the potential to influence gold prices significantly. If the inflation data comes in lower than expected, it may reduce the expectation of further interest rate hikes. The lower inflation suggests less aggressive monetary tightening. This could weigh on the US Dollar and potentially support gold prices. This is because a weaker dollar makes gold more attractive to international buyers.
Moreover, the core CPI inflation is expected to remain at 3.2%. However, this could still affect gold prices if it surprises the upside. Persistent core inflation might prompt the Federal Reserve to maintain a hawkish stance. Therefore, this reinforces the likelihood of higher interest rates for a longer period. On the other hand, if the core CPI comes in below expectations, it could strengthen the argument for the Fed to pause rate hikes. This scenario may be supported to gold prices.
The gold market has declined from its record levels before the inflation data release. However, the overall trend remains upward. The release of the CPI data may trigger strong volatility, influenced by ongoing developments in the geopolitical crisis. Additionally, the US President’s meeting with the Israeli Prime Minister is contributing to market fluctuations due to uncertainty surrounding the potential outcomes of the discussions.
Bullish trend in Gold
The gold market has continued to decline over the past four days. However, this drop has been contained within the upward channel, as illustrated in the chart below. This channel has been developing for the past 75 days. A break below this channel could lead to a deeper correction. Strong support levels are observed at $2,613-$2,600, where the price is currently attempting to rebound.
The ascending broadening wedge pattern further reinforces this upward channel. This pattern is a bullish formation and suggests strong volatility. The current volatility is fueled by ongoing geopolitical crises impacting global markets. Any new developments in these geopolitical events could significantly influence the next move in the gold market.
Conclusion
In conclusion, the gold market is awaiting the release of inflation data to determine its next move. Currently, prices are trading at key levels defined by the upward channel. If gold continues to rally from this point, it could break record levels and reach a target of $2,720. Meanwhile, geopolitical uncertainties and technical patterns suggest potential for increased volatility. Strong support remains around $2,613-$2,600. Therefore, both economic data and geopolitical developments will play a crucial role in shaping the gold market’s direction in the near term.
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