Advertisement
Advertisement

Gold (XAU) Price Forecast: Will CPI Data Spark a Rebound or Deepen Declines?

By:
James Hyerczyk
Published: Dec 7, 2024, 18:44 GMT+00:00

Key Points:

  • CPI data and the Fed meeting next week are pivotal, potentially driving gold volatility amid inflation fears.
  • Gold closes at $2,633.33, down 0.64%, marking a second weekly loss as Fed signals and CPI data take center stage.
  • Key levels: Gold must hold above $2,631.04 to avoid a drop toward $2,571.68; $2,663.51 is the resistance to beat.
  • Gold-backed ETF outflows signal low institutional demand despite global geopolitical risks.
  • Mixed U.S. jobs data fuels uncertainty, with a strong payroll gain offset by weaker private sector growth.
Gold Price Forecast

In this article:

Gold Declines for the Second Straight Week as Focus Shifts to CPI

Gold prices closed at $2,633.33 this week, marking a $17.02 decline, or 0.64%, as mixed economic data and cautious Federal Reserve signals influenced sentiment. This marks the second consecutive weekly decline, leaving the metal straddling key pivot levels that could determine its next directional move​.

Key Technical Levels Indicate Uncertainty

Weekly Gold (XAU/USD)

Gold remains perched near pivotal support and resistance zones between $2,663.51 and $2,631.04. A sustained move above $2,663.51 would open the door for bullish momentum, targeting $2,721.42 and possibly $2,790.17. Conversely, a break below $2,631.04 could trigger selling pressure, potentially driving prices toward $2,571.68 and $2,533.76​.

Jobs Data Tempers Rate Cut Optimism

The U.S. nonfarm payrolls report revealed a 227,000 increase in November jobs, exceeding expectations of 200,000. However, weaker private payroll growth painted a more cautious labor market picture. While traders still see a strong likelihood of a 25-basis-point rate cut at the Federal Reserve’s December meeting, Chair Jerome Powell’s positive economic outlook has cooled hopes for aggressive monetary easing. This narrative weighed on gold’s performance throughout the week​​.

Institutional Caution Evident in ETF Outflows

Outflows from gold-backed exchange-traded funds persisted, signaling reduced institutional demand despite geopolitical instability. Market participants appear hesitant to commit as they await clarity from inflation data and Fed guidance. This caution has contributed to gold’s inability to decisively break key levels​​.

CPI and Fed Meeting Could Be Pivotal

Next week’s Consumer Price Index (CPI) data is expected to show a year-over-year increase of 2.7%. An inflation figure above expectations could strengthen the U.S. dollar and Treasury yields, exerting further downward pressure on gold. A softer reading, however, may fuel optimism for additional rate cuts, potentially driving gold higher. With the Fed meeting also scheduled, these events are likely to spark significant volatility​​​.

Market Forecast: Downside Risks Prevail

The bearish sentiment continues to dominate as gold trades just above critical support. A sustained break below $2,631.04 could initiate a move toward $2,571.68, with deeper declines possible. However, dovish surprises in the CPI report or Fed commentary could offer a reprieve, pushing prices back toward $2,663.51 and beyond. Traders should prepare for heightened market activity as these key catalysts unfold.

More Information in our Economic Calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Advertisement