Gold price prediction: how steady is the support at $1,800?

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Sep 15, 2021
  • Gold price has risen to above the resistance-turn-support level of $1,800 after the 1.58% surge on Tuesday.
  • The lower-than-expected CPI data is in line with Fed's narrative that inflationary pressures are transitory.
  • The subsequent easing of taper talks will likely buoy gold price above $1,800 in the short term.

Gold price has remained buoyed above the crucial support level of $1,800 after surging above it in the previous session. Tuesday’s rallying of over 1.5% is a reaction to the lower-than-expected US CPI numbers.

gold price
gold price

US inflation numbers

According to the US Bureau of Labor Statistics, consumer prices rose by 5.3% in August on a year-on-year basis compared to the previous 5.4%. Notably, the released figure matches with analysts’ expectations. On a month-on-month basis, the reading of 0.3% was a decline from July’s 0.5% and the expected 0.4%. With the exclusion of the volatile food and energy components, core CPI came in at 4.0% compared to the forecasted 4.2% and the previous 4.3%.

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The US inflation data are in line with the Fed’s narrative that the inflationary pressures are transitory. For instance, use car prices were down by 1.5% while air ticket prices declined by 9.1% MoM. Other than energy, various items have had their prices stabilize.

While a one-month decline in consumer prices is not sufficient to set a trend, it will likely ease the taper talks. Subsequently, eased pressures on the need for the Fed to tighten its policy right away will be a bullish catalyst for gold price.

As the central bank has maintained in its recent meetings, tapering of asset purchases will not be a precursor for hiking interest rates. Notably, a low-interest rate environment tends to boost precious metals while weighing on the US dollar.

Gold price prediction

Gold price is back up above the resistance-turn-support level of 1,800. On Tuesday, the precious metal surged from an intraday low of 1,780.60. The subsequent rebound represented a 1.58%. It hit a high of 1,808.65 before pulling back to its current 1,803.58.

On a two-hour chart, gold price is trading above the 25 and 50-day exponential moving averages. An evaluation of both the fundamentals and technical point to further short-term gains for the precious metal.

In the near term, it will likely hover around the crucial support level of 1,800. The subsequent formation of a horizontal channel will probably have the upper and lower borders at the resistance level of 1,808.96 an along the 25-day EMA at 1,797.03.  However, this thesis will be invalidated by a move below the channel’s lower borer.

gold price
gold price

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