Gold’s Shine Poised for CPI Test

Gold Spot prices (XAUUSD) started the week flat, hovering around $2,020 per ounce, poised for a fourth consecutive session of declines. The lack of market movement was attributed to the closure of major Asia Pacific markets for holidays, dampening trading activity. Investors eagerly await Tuesday’s US Consumer Price Index (CPI) release, a critical data point influencing the Federal Reserve’s rate policy outlook and, consequently, gold’s future direction. 

Despite reduced expectations for 2024 rate cuts, gold has displayed surprising resilience. This neutral positioning suggests a potential upside if softer-than-expected inflation data fuels hope for earlier rate cuts, weakening the dollar and boosting gold’s appeal. Conversely, a hotter-than-expected CPI could test the crucial $2,000/ounce mark. 

Upcoming speeches from several Fed officials further heighten market vigilance. While a March rate cut seems unlikely, May holds a 50% chance, impacting short-term sentiment. Recent comments by Chairman Powell highlight a cautious, data-driven approach, balancing the risks of premature action and excessive inflation. 


The 4-hour chart shows that gold’s current price at $2,024.04/ounce maintains a flat trend near the 23.60% Fibonacci retracement level within a descending triangle pattern. The price action trades below the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), indicating a bearish sentiment. The recent downward-sloping 20-SMA broke below the 50-SMA and 100-SMA, signalling a potential further downside. 

RSI is currently flat at 42.53, suggesting indecision. A break above the 50 level could indicate bullish momentum, while a drop below 40 could signal potential downside risk. Therefore, a break below the triangle could offer short-term trading opportunities towards the $2,011.28 support level. Even though a potential retest exists post-breakout, a break below the initial support could offer additional short-term trading opportunities towards the $2,001.79/ounce support level.  

•           However, short-term trading opportunities could exist towards the 38.20% Fibonacci retracement level ($2,034.89/ounce) should the price action sustain a break above the triangle. A break above the $2,034.89/ounce level would likely bring the 50.00% Fibonacci retracement level ($2,045.11/ounce) and 61.80% Fibonacci retracement level ($2,055.33/ounce) within the bulls’ reach in the short term. 


Gold’s price action in the coming days will likely be driven by the CPI data and Fed commentary. A dovish shift from the Fed, coupled with weaker-than-expected inflation, could trigger a rally towards the $2,050 level. However, a hawkish stance and stronger inflation data could lead to a short-term pullback towards the $2,000 support level. 

Sources: TradingView, Trading Economics, Dow Jones Newswire, CNBC, Reuters. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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