Bullish CPI Report Could Put June Gold on Path to $2000

Gold futures are edging higher early Tuesday as traders attempt to claw back some the gains lost the previous session following a rally to its highest level since March 14.

The price action suggests bullish traders are in control as they shrug off rising Treasury yields and a firmer U.S. Dollar, while putting most of their focus on the upcoming U.S. Consumer Inflation (CPI) report, due to be released at 12:30 GMT.

At 04:35 GMT, June Comex gold futures are trading $1964.00, up $15.80 or +0.81%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $182.31, up $0.84 or +0.46%.

Today’s U.S. inflation data could help investors get more clues about the Federal Reserve’s monetary policy stance.

Economists polled by Reuters forecast the U.S. CPI would post an 8.4% year-over-year increase in March.

NatWest Markets economists have forecast a 1.1% month-on-month jump in the headline inflation figure which would be the largest monthly gain since June 2008.

The current movement in the gold market suggests bullish traders may believe the Fed is still behind the curve when it comes to fighting soaring inflation, and that they may want to start seeing proof that rate hikes are working before they start trimming long positions.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend changed to up on Monday when buyers took out the previous swing top at $1972.50. A trade through $1974.60 will signal a resumption of the uptrend. The main trend will change to down if sellers take out $1916.20.

The market is currently trading on the strong side of the Fibonacci level at $1958.70, making it support. Additional support is a 50% level at $1932.90 and a support cluster at $1908.10 – $1897.70.

The short-term range is $2082.00 to $1893.20. Its retracement zone at $1987.60 to $2009.90 is the next upside target. Trader reaction to this zone will determine the near-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the June Comex gold futures contract on Tuesday is likely to be determined by trader reaction to $1958.70.

Bullish Scenario

A sustained move over $1958.70 will indicate the presence of buyers. Taking out $1974.60 will indicate the buying is getting stronger with $1987.60 to $2009.90 the next target area.

Look for counter-trend sellers on the first test of $1987.60 to $2009.90. They are going to try to form a secondary lower top. Taking out $2009.90, however, could trigger an acceleration into $2082.00.

Bearish Scenario

A sustained move under $1958.70 will signal the presence of sellers. This could trigger a quick break into the 50% level at $1932.90. Since the main trend is up, buyers could come in on the first test of this level.

If $1932.90 fails as support then look for the selling to possibly extend into the main bottom at $1916.20, followed by the support cluster at $1908.10 to $1897.70. This is the last support before the main bottom at $1893.20. Taking out this level could trigger the start of an acceleration to the downside.