CPI Up Next

Gold traders are bracing for fireworks today with the latest US inflation figures due this afternoon. As traders continue to battle to tie down an expected Fed easing date, today’s data will be highly important and carries plenty of volatility risk. The yellow metal has seen solid gains over the last month as safe-haven inflows linked to rising geopolitical risks have combined with Fed easing expectations to bolster demand. Today, gold bulls will be hoping for a fresh drop in inflation to bring forward these easing expectations, send USD lower and allow a fresh move higher in the metal.

Bearish Gold View

On the numbers front, the market is looking for headline annualised inflation to move higher to 3.4% from 3.2% prior. If seen, this will further dampen near-term rate-cut expectations, likely fuelling some corrective activity in gold as USD catches a bid. On the back of another bumper set of jobs numbers last week, a further hot inflation reading here would see June rate-cut pricing sinking lower.

Bullish Gold View

On the other hand, if we see a fresh drop in today’s inflation readings, this should put a June rate-cut back on the table, weighing on USD and pushing gold and other commodities higher. The Fed has said recently that it will remain data dependent in its policy decisions. As such, traders get the sense that the bank is looking for CPI to resume its downward trajectory before committing to easing, meaning that a downside surprise today will likely be more market moving than a strong number.

Technical Views

Gold

The rally in gold prices has seen the market breaking out above the 2221.39 level and above the bull channel highs. Price is now testing the 2364.93 level resistance, the current all-time highs. Momentum studies are softening a little, highlighting pullback risks. However, while price holds above the 2221.39 level, the focus is on a further push higher. 

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