Gold Cautiously Moves Higher Ahead Of US CPI Data

The US Dollar is starting to recover after dropping to seven-month lows and a rebound could follow a higher Consumer Price Index data.

Gold price is trading at $1877.24 at the time of writing, higher by almost 0.3% versus the previous closing price at $1871.65 on Monday, after climbing from $1,867.92 to a high of $1,880.79 on the day.

Bulls have been in charge for several days as the US Dollar met a seven-month low of 102.9 in the prior sessions. However, traders are watchfully awaiting Thursday’s US Consumer Price Index data that usually accompanies a potentially technically bearish schematic price action.

According to several analysts, bulls could be caught into a trap if markets fall in the mistake of underestimating the Fed’s future decisions. It is relatively difficult to reconcile risk rally with deep US yield curve inversion.

The strength of gold prices is inconsistent with the bearish macroeconomic data, as highlighted by its diverging relationship with real rates.

Some analysts explained that relentless buying from China has fueled a squeeze on CTA trend follower positioning over the past months, and has yet to show signs of abating. Mysterious large-scale Chinese purchases of gold have single-handedly catalyzed a $150/oz rally.

Tracking of or the top ten traders in China highlights a continued accumulation of gold, with this cohort adding another 2.4 tons of notional gold to their net length overnight.

US Dollar came under modest selling pressure following the Fed Chair, Jerome Powell, who made unrelated comments at the start of the US session: ”We are not and will not be a climate policymaker”.

However, the DXY index is trading back around 103.25 and is now flat on the day in the middle of the 103.03/49 range. The US Dollar has been recovering from a seven-month low of 102.9 in the prior session as hawkish remarks from Fed policymakers this week so far have sparked a fresh wave of demand for the US Dollar.

US Treasury bond yields rose ahead of US December inflation data coming Thursday. The report is expected to say inflation rose at an annualized rate of 6.5% last month, down from 7.1% in November.