Could CPI data push gold prices above $1,900?

Gold futures were at an eight-month high, climbing 14% since late November to hit $1,882 per ounce earlier on Wednesday. At the time of writing the precious metal is trading at $1876.80 per ounce.

Investors normally flock to assets that offer regular returns, such as government bonds, when interest rates are rising. Gold prices deteriorated in April 2022 as the US Federal Reserve started to hike interest rates to tame burning hot inflation.

Uncertainty is dominant across financial markets as central bank monetary policies push the global economy into a slowdown that can potentially turn into a recession during the fight against hot inflation.

While gold has a chance of soaring above $1,900 an ounce ahead of the weekend despite some downside risks that could also emerge. Any softer CPI print could already be priced into the market.

A rally in gold, on, Thursday could lead to some profit-taking after a solid start to the year. At current levels, investors should not chase the market and traders who have tactical long positions might want to reduce their exposure.

After gold’s strong start since day one of 2023, momentum is beginning to diminish as the $1,880 level proves to be too stubborn to surpass.

Market sentiment is bullish as some analysts expect weak inflation data to drive the precious metal’s price above $1,900 per ounce by the end of the current trading week.

On Thursday, the US Labuor Department will release awaited Consumer Price Index and economists expect that prices significantly cooled in December. Annual inflation is forecasted to rise 6.5%, down from 7.1% reported in November.

Further cooling in prices in December and lower bond yields would mean good news for the non-yielding gold. Bulls are in a position of power with the next key level of interest found at $1900.

Gold’s price action during the past week has showed the correct direction for 2023, but while the direction is correct, some economists believe the timing could be wrong. While momentum supports technical and speculative buying, activity in Exchange-traded fund market from longer-term investors is seen as lukewarm, raising the short-term risk of a correction.