Gold Lingers Near Two-Week Peak Ahead Of U.S. Inflation Data

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On Wednesday, gold prices stayed close to a two-week high reached during the previous session. According to analysts, inflation woes supported bullion on the downside while the expected interest rate hikes kept gains in check. Another factor that weighs on the yellow is the U.S. Treasury yields, which remain near a multi-year high ahead of the closely watched U.S. inflation data. The yield on the benchmark 10-year Treasury note has jumped by around 40 basis points to more than 1.9% so far this year.

Spot gold is currently trading at $1,826.60 per ounce as of 0910 GMT.

A Reuters poll revealed that the U.S. consumer price index for January is expected to increase by 0.5%. That is equivalent to an annual growth of 7.3%, which is the largest increase in almost four decades.

ANZ commodities strategist Soni Kumari suggested that inflation expectations are the current driving force behind gold prices. He said that the Federal Reserve’s rate hike plans are already priced-in. DailyFX currency strategist Ilya Spivak argued that the focus is on real rates. He explained that when real rates go up, gold prices go down. And right now, real rates remain negative and less attractive than gold.

On the technical front, Reuters analyst Wang Tao predicted that spot gold might test a resistance at $1,836 per ounce. A breach of that level could push the bullion further up to $1,854.

DailyFX strategist Margaret Yang added that the bullion is currently in a tight range trading condition. It resulted from traders’ efforts to strike a balance between Fed policy tightening and rising inflation. She also said that gold is supported by the heightened tensions between Russia and Ukraine that boosted the demand for safe-haven assets.

Yang noted that gold prices have breached the 100-day simple moving average line and will likely text next resistance at $1,834 per ounce. She also mentioned that the moving average convergence divergence indicator formed a bullish crossover above the neutral midpoint. It indicates bullish momentum.

In physical trading, gold prices in India fell despite stable global rates through they remain near a two-week peak. Gold futures on the MCX dropped by 0.03%. In China, benchmark prices for spot interbank gold transactions rose by more than two yuan from the previous trading session.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, increased by 0.4% yesterday.