GOLD AWAITS US CPI DATA Despite projecting lower towards the backend of the week, price action in gold had been somewhat encouraging with the precious metal trying to make a double bottom. A culmination of a milder USD and US returns had in substantial part of gold costs, however, the key place at $1760-65 has continued to cap rallies and thus keeps risks tilting lower.
As we look towards next week, the main focus will be on the US CPI reading, that will be a vital factor as to whether gold prices were able to break immunity or return towards $1700. Having a look at last months studying, that saw the headline CPI rate based on expectations, the core reading had been slightly milder however. Subsequently, the initial reaction in gold was higher, on the basis that US yields edged lower. Alongside this, given that the market stay fixated that a spike in inflation is coming, if we see a small downturn from the figure, this is likely to give good grounds for a breach of $1760-65, my idea behind this is that yields have been the biggest determinant for its precious metal. The chart below highlights the association between gold and real returns (inverted).
GOLD LEVELS TO WATCH
The principal area to focus on is 1760-65, in which a move lower in US yields will be needed to assist gold break this immunity. Should this area be broken, this paves the way for a transfer to 1790-1800. While on the flip side, a close below $1670 would likely invalidate the possible recovery and open the doors to $1600.