Gold Continues To Deteriorate Ahead Of CPI Data

The gold price continues to retreat despite some relief in the US dollar’s advance. The XAU/USD is down some 0.46% at $1,845 while the DXY is trading at 103.85 and up just 0.1%.

The dollar maintained choppy performance on Tuesday, shifting between modest gains as traders do concentrate on Wednesday’s US Consumer Price Index data which could give clues on the likely path of the Federal Reserve’s monetary policy.

Investors have been in a risk-on mood, as the yield on the benchmark US 10-year note eased back below the 3% psychological level and from the highest levels since 2018 at 3.20% scored on Monday. This has given some relief to US equity benchmarks that have been mixed in choppy trade. The Dow Jones Industrial Average has recovered to flat, with the S&P 500 up come 0.55%. The Nasdaq Composite is higher by some 1.9%.

Systematic trend followers are joining into the liquidation vacuum in gold. Finally, trend signals have sufficiently deteriorated to catalyze a substantial selling program in gold. With gold prices challenging the psychologically important $1850/oz range, the additional CTA flow could be sufficient to spark a breakdown in this technical level.

Tomorrow’s CPI is expected to rise by 0.5% MoM in April and headline to rise by 0.3%, as food and energy prices eased, according to analysts at ANZ bank. ”Inflation has probably peaked on a YoY basis, but monthly inflation trends remain stubbornly high and above rates consistent with 2%. Fed Chair Powell wants to reduce the excessive demand in the labour market by achieving a reduction in job openings without unemployment rising. Navigating that path will be challenging.”

Technically, the price has fallen through the bottom of 4-hour support and is now testing daily support as follows with the focus now on $1,820 to the downside. The M-formation is a reversion pattern so there could be a meanwhile bid at this juncture on failures to crack the daily support initially.