Price of Gold Fundamental Daily Forecast – Headline CPI Over 9% Could Trigger Steep Break

Gold futures are inching higher on Wednesday after touching a more than nine month low earlier in the session. The price action suggests traders are cautiously positioning themselves ahead of the release of the June U.S. Consumer Price Index (CPI) report at 12:30 GMT.

Traders are saying that the headline figure will come in hot, but the so-called ‘core’ number could show that inflation is cooling. This type of mixed report tends to lead to volatile whip-saw price action.

At 10:10 GMT, August Comex gold futures are trading $1727.40, up $2.60 or +0.15%. This is up from an intraday low of $1719.80. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $160.84, down $0.59 or -0.36%.

Unless the headline CPI data comes in above 9.0%, we could be looking at a sell the rumor, buy the fact situation. Currently, the market is pricing in a 75 basis point rate hike by the Fed in July and a 50 basis point rate hike in September. A reading that meets expectations could turn gold prices higher since it has already been priced in.

A reading above 9.0% or a surge in the core CPI could put a 75 basis point rate hike for September on the table and this could trigger a steep drop in gold prices.

Short-Term Outlook

Trader reaction to $1724.80 is likely to determine the direction of the August Comex Gold futures contract on Wednesday.

Bullish Scenario

A sustained move over $1724.80 will indicate the presence of buyers. The first upside target is a minor pivot at $1735.70.

Overtaking $1735.70 will indicate the counter-trend buying is getting stronger. This could trigger a surge into the minor top at $1751.70. A trade through this level will change the minor trend to up and shift momentum to the upside.

The minor top at $1751.70 is also the trigger point for an acceleration to the upside with $1777.40 – $1790.90 the next potential target zone.

Bearish Scenario

A sustained move under $1724.80 will signal the presence of sellers. Taking out the intraday low at $1719.80 could trigger an acceleration to the downside with the March 8, 2021 main bottom at $1694.90 the major target.

Side Notes

A close over $1724.80 will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.