Gold market analysis: the US CPI announcement is imminent, gold continues to fall slightly

Gold prices saw a new round of selling on Thursday (December 9) and fell further from the one-week high hit the day before. Intraday selling accelerated in the North American market in early trading, pulling gold/dollar back to a level close to the weekly low of $1,775 in the past hour, and the price of gold has fallen for the second day in a row.



Due to the Fed’s hawkish expectations and the rebound in demand for the U.S. dollar, continued pressure on gold. Investors seem to be convinced that the Fed will be forced to tighten monetary policy sooner rather than later to curb persistently high inflation. This has always been seen as a leading factor in weakening the demand for non-yielding gold. Nonetheless, risk aversion - as described by the general weakness in the stock market - provided some support for traditional safe-haven assets and helped limit the decline in gold/dollar. However, news about the Omicron variant of the coronavirus has been mixed, casting a shadow over recent optimism. Pfizer said on Wednesday that in laboratory tests, the three-shot course of their COVID-19 vaccine was able to neutralize the Omicron variant. However, British Prime Minister Boris Johnson implemented new COVID-19 restrictions in the UK on Wednesday to slow the spread of the new variant. The hedging effect brought about by the epidemic seems to be very limited. Investors may also avoid making big bets and would rather wait for the latest US consumer inflation data released on Friday to bring new stimulus factors. The US Consumer Price Index (CPI) report will be seen as a new clue to the Fed's next interest rate hike policy. This, in turn, will affect the price dynamics of the U.S. dollar and the price of gold before the monetary policy meeting of the Federal Open Market Committee next week. Therefore, traders and investors are quite cautious in their trading to avoid establishing heavier positions. Therefore, the recent spot gold volatility is quite limited.

From a technical point of view, the overnight blockade near the technically important 200-day moving average and the subsequent decline are beneficial to bearish traders. The price of gold seems to be expected to continue its recent correction from a multi-month high, and to test again the monthly volatility low near US$1,762 touched last week. On the other hand, it needs to continue to break above the 200-day moving average to support a major upside outlook. At that time, the spot price may break through the $1,800 barrier and test the next relevant resistance level near the $1,810-15 resistance area. This kinetic momentum may further extend to the strong resistance of 1,832-34 USD, which will become a key point for short-term traders. The U.S. CPI data on Friday night is more critical, and we should pay close attention to its impact.

Only personal views, not representative of the organization’s views

Source: Bank of China's official website, Bank of China Guangdong Branch Wang Gang, original title: "20211210—US CPI is about to be announced, gold continues to fall slightly"