On Tuesday (December 12th) in the European market, spot gold maintained a mild rebound trend within the day, with gold prices currently reporting around $1986 per ounce. On this trading day, gold traders will focus on the US CPI report, which is expected to trigger a major gold price trend.
FXStreet analyst Dhwani Mehta pointed out that after hitting a three week low of $1976 per ounce on Monday, gold prices are "licking their wounds".
Mehta stated that from the technical indicators of the gold daily chart, the gold price is located between two key moving averages, and the relative strength index (RSI) is bearish.
Focusing on the US CPI report
Gold traders are now looking forward to crucial US CPI inflation data to gain new directional momentum. The US CPI data will set the tone for the next week, with the focus on the Federal Reserve's interest rate decision.
At 21:30 Beijing time on Tuesday, investors will receive the November Consumer Price Index (CPI) report from the United States. The US CPI is expected to increase by 3.1% year-on-year in November, lower than the 3.2% increase in October; The core CPI of the United States is expected to climb 4.0% year-on-year in November, the same increase as last month.
Mehta pointed out that if the US CPI data is higher than expected, it is expected to inject new buying interest into the US dollar and bond yields, as this means that the Federal Reserve may maintain high interest rates for a longer period of time to curb inflation, thus contradicting the market's expectation of interest rate cuts as early as March next year.
However, if the US CPI inflation slows sharply, this may support the Federal Reserve's interest rate reduction bet, which will seriously drag down the US dollar and US bond yields. Therefore, the price of gold will continue to be dominated by the reaction of the US dollar and yield to inflation data, in order to gain new trading incentives.
However, Mehta warns that the reaction of gold prices to US CPI data may soon reverse as traders will readjust their positions before the Federal Reserve announces policy on Wednesday.
According to the Federal Reserve Watch tool of the Chicago Mercantile Exchange (CME), the market currently expects a 45% probability of the Federal Reserve cutting interest rates in March next year, compared to a 57% probability a week ago. However, the market expects an 80% chance of a rate cut in May next year.
Analysis of the Latest Technology Prospects of Gold
Mehta pointed out that from the daily chart, it can be seen that gold prices closed below the 21 day moving average (SMA) of $2006 per ounce on Monday, after falling below the upward trend support of $2024 per ounce last Friday.
Mehta stated that the 14 day relative strength index (RSI) was weak and still below the 50 level, indicating that any increase in gold prices may be temporary.
The short-term support level for gold prices is seen near the $1965/ounce range, which is the intersection of the November 20th low and the 50 day moving average.
If gold sellers manage to find a strong foothold below $1965 per ounce, then the 200 day moving average of $1952 per ounce will provide support. Looking further down, conquering the 100 day moving average of $1941 per ounce may be a tricky task for gold sellers.
On the other hand, Mehta added that any recovery in gold prices would require breaking the 21 day moving average of $2006 per ounce at the end of the day. At that time, gold buyers will target the November 27th high of $2018 per ounce and move towards the resistance range of $2040 per ounce.
