The Gold Prices hit a record high, breaking a nine-day winning streak, and met some supply. A small profit-taking before the significant US CPI report may cause the decline. The USD bulls should receive support from bets on a June Fed rate drop, which would keep them cautious.

Technical Overview

The 14-day Relative Strength Index (RSI) indicates that overbought circumstances are present on the daily chart, suggesting that a correction is likely in the offing. The near-term technical forecast for the price of gold is almost unchanged.

The US CPI data, however, continues to determine the direction of gold’s next move.

The price of gold might increase to an all-time high of $2,195 in case of a bearish surprise in the US CPI figures. Over that point, a sustained break over the $2,200 barrier is required to target the psychological level of $2,250.

Conversely, substantial US inflation numbers suggest that the gold price drop will probably continue, possibly reaching the $2,154 low of March 8.

The next level of support is located at $2,145, which also happens to be the location of the March 7 low and the 23.6% Fibonacci Retracement (Fibo) level of the most recent rally from the low of $1,984 on February 14 to the all-time high of $2,195.

Basic Synopsis

Before Tuesday at 12:30 GMT, when the crucial US Consumer Price Index (CPI) inflation data is released, the US Dollar has entered a phase of harmful consolidation. The primary inflation indicator is still in the spotlight, particularly in light of the recent sharply lower revision to the January Nonfarm Payrolls figure and a string of dismal US economic statistics.

In contrast to market estimates of 200K, the February NFP climbed by 275K, and the January result of 353K was cut lower by 124K to 229 K. A gauge of wage inflation, average hourly earnings, increased 4.3% YoY in February after growing 4.4% the prior month.

According to the CME FedWatch Tool, markets are currently pricing in a 70% likelihood that the Fed could start easing rates in June, slightly less than the 75% probability seen on Monday.

While core inflation is predicted to have eased from 3.9% YoY in January to 3.7% YoY in the reported period, the annual US CPI is expected to rise 3.1% in February, at the same rate observed in January. The more significant monthly CPI is anticipated to increase by 0.4% last month as opposed to 0.3% in January. Inflation for the Core CPI is expected to be 0.3% MoM, down from 0.4% in January of this year.

The US Federal Reserve (Fed) is expected to cut interest rates in June if the monthly headline and core CPI inflation surprise the downside. This would cause the US dollar to continue to decline and push the price of gold to all-time highs. If the US CPI surprises negatively, there will be significant adverse pressure on US Treasury bond yields, which will start a new rally in the price of non-interest-bearing gold.

However, gold prices may drop dramatically if US inflation data surprises market watchers and significantly raises anticipation of a dovish Fed policy reversal as early as June.

The price of gold is expected to continue its cautious trading pace in the lead-up to the US CPI data, as risk sentiment is still somewhat optimistic.