Gold price: US CPI data, Treasury yields shape short-term path

Gold price has held steady above the psychological level of $2,000 ahead of the US CPI data set for release on Wednesday. The strong jobs report on Friday last week yielded a pullback from the fresh record high. However, investors expect the inflation numbers to support the Fed’s dovish tone.  


While gold price has been on a rebound for two sessions now, investors are rather reluctant to place aggressive bets on the asset. Instead, they await cues on the health of the US economy and direction of Fed’s interest rates from the US CPI numbers scheduled for release on Wednesday.

Following its meeting last week, the central bank indicated that economic data will influence its decision in coming months. On Friday, a strong US jobs report raised concerns that the Fed may further raise interest rates; an aspect that weighed on gold price. However, signs that inflation is easing may restate the Fed’s dovish tone.

Even so, gold price gains have been curbed by the rising Treasury yields. Higher yields tend to increase the opportunity cost of holding the non-yielding bullion.

The benchmark 10-year yields was at a one-week high on Tuesday amid concerns over the country’s debt ceiling. On Monday, Treasury Secretary, Janet Yellen warned that failure by Congress to raise the federal debt limit may have a negative impact on the US economy. Subsequently, investors have been selling off the bonds set to mature during the period when the US is set to hit its debt limit. Government bond yields are inversely related to bond prices.  

Gold price technical analysis

Gold price has been on a rebound in the week’s first two sessions after pulling back from its fresh record high late last week. As investors await guidance from US inflation data, the precious metal has held steady above the psychologically crucial zone of 2,000.

Indeed, the bulls remain in control of the market with the asset still trading above the 25 and 50-day EMAs. Amid the uncertainties in the market, I am still bullish on the precious metal and forecast a new record high in the foreseeable future. As at the time of writing, it was up by 0.81% at 2,036.61.

As highlighted in the previous article, gold price will likely remain within the range of between 2,000 and 2,050 ahead of US CPI numbers on Wednesday. Signs that inflation has continued to ease may heighten bets on Fed’s dovish stance, giving the bulls an opportunity to break the resistance at 2,050. If that happens, there will be an opportunity to rally further to the next target at 2,070.81.

On the flip side, signs that inflation remains persistently high may yield a kneejerk reaction in the form a decline to 1,978.08.

gold price
gold price

Leave a Reply

Your email address will not be published.