XAU/USD outlook: Bears are pausing ahead of US inflation report

XAU/USD

Gold is consolidating above key supports in early Monday as bears take a breather after last week’s 2.7% fall and markets await fresh signals from US inflation report, due on Tuesday.

The metal’s price was sharply down last week on hawkish remarks from Fed Chair Powell, which faded expectations for an end of hiking cycle and possible rate cuts in the near future and lifted dollar, although geopolitical risks and persisting economic growth concerns continue to fuel demand for safe-haven gold.

Technical picture on daily chart weakened as 14-d momentum entered negative territory and 10/20DMA’a turned to bearish setup, but fresh bears faced strong headwinds from key supports at $1935/33 (200DMA / Fibo 38.2% of $1810/$2009 upleg) and so far holding above these supports.

Clear break here is needed to signal bearish continuation after another failure at psychological $2000 barrier and expose targets at $1909/00 (50% retracement / round-figure).

Focus turns on US Oct CPI data which are expected to provide more clues about Fed’s next steps, whether the central bank will stay on hold in December or opt for another rate hike.

Core inflation is expected to remain unchanged in both, monthly and year on year readings, which will present neutral to negative view, as it will signal a pause in CPI’s larger downward trajectory.

On the other hand, any stronger divergence from consensus (in both directions) would generate fresh signal, with higher than expected readings in October to offer fresh support to dollar and further weaken yellow metal’s price, while lower inflation would add to expectations of an end of tightening cycle and deflate dollar.

Res: 1942; 1950; 1962; 1967.
Sup: 1933; 1924; 1909; 1900.

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