Gold Price Forecast XAU/USD – Firm Amid Rising Expectations of Easing Consumer Inflation

Gold futures are edging higher on Thursday shortly before the release of a major U.S. inflation report that could determine the near-term direction of the Federal Reserve’s rate-hike path. Helping to buoy the market is an overnight dip in Treasury yields and a softer U.S. Dollar.

At 11:12 GMT, February Comex gold is trading $1888.50, up $9.60 or +0.51%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $174.59, down $0.15 or -0.09%.

U.S. Treasury yields are slightly lower Thursday as investors awaited key inflation data, which could affect upcoming Federal Reserve interest rate policy decisions.

Meanwhile, the U.S. Dollar fell as the Euro and Japanese Yen firmed on expectations that the Fed may be nearing the end of its aggressive monetary policy tightening campaign and that it may not have to raise rates as high as previously feared.

Lower interest rates are good for gold because it lowers the opportunity cost of holding non-yielding bullion. A weaker dollar is also a positive because it tends to make the precious metal more attractive to foreign buyers.

All Eyes on U.S. Consumer Inflation Data

The U.S. consumer price index report is due to be released at 13:30 GMT. Economists polled by Reuters estimate that consumer prices were up 6.5% year-on-year in December, moderating from a 7.1% rise in November. Core consumer inflation is expected to ease to 5.7%.

Demand for gold has been strong since investors started lowering Fed rate hike expectations after last Friday’s data signaled a weakening economy. Prices could push higher if inflation continues to cool in the largest economy in the world.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1890.90 will signal a resumption of the uptrend. A move through $1752.90 will change the main trend to down.

The minor trend is also up. A trade through $1829.90 will change the minor trend to down. This will shift momentum.

The nearest resistance is a long-term Fibonacci level at $1915.30. The nearest support is a long-term 50% level at $1851.30, followed by a pivot at $1841.80.

Daily Swing Chart Technical Forecast

Trader reaction to $1878.90 is likely to determine the direction of the February Comex gold futures contract on Thursday.

Bullish Scenario

A sustained move over $1878.90 will indicate the presence of buyers. Taking out the weekly high at $1890.90 will indicate the buying is getting stronger with $1915.30 the next likely target.

Bearish Scenario

A sustained move under $1878.90 will signal the presence of sellers. The nearest target is a 50% level at $1861.30, followed by a second pivot at $1841.80 and the minor bottom at $1829.90.

Side Notes

A close below $1878.90 will form a potentially bearish closing price reversal top. This won’t change the trend, but if confirmed, it could trigger the start of a 2-3 day counter-trend reaction.