Gold retreats to 5-week lows around $1850

Gold has dived to five-week lows at around $1850 with the beginning of the new trading week as bears eye the 100-DMA beneath $1820.

Market participants are eyeing Tuesday’s US CPI data, which could reaffirm the disinflation process has already started. A daily close below $1850 would pave the way toward $1820. Gold price retreated from last Friday’s highs of $1872.22 and dropped toward the $1850 area on Monday despite the US Dollar fall, ahead of a vital inflation report from the United States.

Additionally, US Treasury yields, albeit edging down, remain at around five-week highs. At the time of writing, the XAU/USD is trading at $1852.88. Gold retraces to $1850 weighed by a risk-on mood. The Gold Index XAU/USD is under pressure, while the US Dollar Index, a measure of the buck’s value versus a basket of peers, drops 0.18%, down at 103.391, undermined by the US 10-year Treasury bond yield, with the 10-year benchmark not dropping one and a half bps to 3.726%.

Investors are awaiting a report from the Bureau of Labour Statistics on Tuesday, revealing the Consumer Price Index for January, estimated at 6.2% YoY, lower than the 6.5% in December. The core CPI excludes volatile items like food and energy, which is foreseen at 5.5% YoY, from 5.7% in the previous month.

Fed hawkish commentary continued with the Fed Governor Michell Bownman, who said that the Federal Reserve (Fed) needs to continue to raise rates to get the Federal Funds Rate to a sufficiently restrictive level, as the US central bank battles high inflationary pressures.

US Federal Reserve of New York revealed inflation expectations for the year hold steady at 5%. For a three-year horizon, the poll showed that inflation would stand at 2.7%, down from December 2.9%, while for a five-year span, it was projected at 2.5%, vs. 2.4 in the prior month.

Technically; gold is neutral to slightly downward biased. At the time of writing, the yellow metal falls beneath the 50-day Exponential Moving Average at $1856.58, exacerbating further selling pressure. On the downside, the following support levels would be the December 26 daily high of 1833.29 turned support, followed by the 100-day EMA at 1817.77, and the confluence of the 200-day EMA, and the figure at $1800.