Gold price prediction ahead of US inflation data

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 Jan 10, 2022
  • Gold price remains below $1,800 even after rebounding on Friday.
  • In the new week, the focus will be on the US CPI data.
  • US inflation is expected to have risen at the fastest rate in four decades.

Gold price edged higher on Friday after the lower-than-expected nonfarm payroll numbers. In the new week, the theme will continue as investors await the US CPI data on Wednesday.

US inflation

Gold price bounced off Friday’s low after the highly-anticipated nonfarm payrolls missed experts’ estimates. The actual reading of 199,000 was significantly below the forecasted 400,000 and November’s 249,000. Subsequently, the dollar index dropped to its lowest level since Monday at $95.70.

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In the new week, the focus will be on the US CPI numbers scheduled for release on Wednesday. Analysts forecast US inflation to have risen at the fastest rate in four decades. Consumer prices are expected to have surged by 7.0% YoY and 0.4% from November.

The expected surge in US inflation will substantiate the ongoing concerns over the economy overheating and the Fed’s decision to tighten its monetary policy. Investors will be looking for cues on the feasibility of a March rate hike.

At the same time, Friday’s data showed declining unemployment and rise in wages. The environment shaped by a tight labor market and heightened inflationary pressures will likely continue to weigh on gold price while boosting the US dollar.    

Gold price prediction

Gold price rebounded from Friday’s low as a reaction to the lower-than-expected US nonfarm payroll numbers. The precious metal is back to the range-bound trading it exhibited earlier in the day. However, it remains below the psychologically crucial level of 1,800 which it dropped below on Thursday as a reaction to the FOMC meeting minutes.

After bouncing off its intraday low of 1,782.98, gold price ended the week at 1,796.63. On a four-hour chart, it is trading below the 25 and 50-day exponential moving averages. It is also below the long-term 200-day EMA.

In the ensuing sessions, I expect the precious metal to record curbed gains amid the ongoing bets of faster-than-expected rate hikes. From this perspective, it may find some resistance around the crucial zone of 1,800. In particular, the level along the 200-day EMA at 1,801.26 is one to look out for.

On the lower side, a move below the current support level of 1,785.28 will likely push it to 1,777.25. A further decline may have the bulls defend the support at 1,770.18.

On the flip side, the bulls may gather enough momentum to break the aforementioned resistance level. If that happens, gold price may rise to 1,810.35 before pulling back.

gold price
gold price
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