Gold price forecast: inflation concerns surge ahead of US CPI data

on Feb 7, 2022
  • Gold price has edged higher after US bond yields eased from the 2019 high hit on Friday.
  • Heightened volatility in the stock market and soaring Treasury yields have led to inflation worries.
  • Investors are now keen on the US CPI data scheduled for release on Thursday.

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Gold price is back above the critical level of $1,800 per ounce following the easing of US bond yields’ rallying. On Friday, the higher-than-expected US job numbers resulted in a rise in Treasury yields while exerting pressure on the precious metal.

gold price
gold price

US Job numbers

According to the Labor Department, nonfarm payrolls rose by 467,000 in January. Employment has been at the core of the Federal Reserve’s path to tightening its monetary policy. Subsequently, the job numbers supported the central bank’s plan to hike interest rates from as early as March.

As a reaction to Friday’s data, the benchmark 10-year Treasury yields rose to the highest level since December 2019 at 1.93%. They have since pulled back to 1.90%.

US Inflation data

The surge in US bond yields and the volatility that has shaped the stock market in recent weeks has boosted gold’s demand as a hedge against inflation. Nonetheless, an environment of higher interest rates will increase the opportunity cost of holding the non-yielding bullion.

In the ensuing sessions, gold price may be range-bound as investors await the inflation data scheduled for release on Thursday. Analysts expect consumer prices to have risen by 7.3% on an annual basis. This would be the highest rise since 1982.

Gold price technical analysis

After dropping to an intraday low of 1,792.56 on Friday, gold price rose to 1,815.56 in early Monday trading. Since then, it has pulled back to 1,810.61 as at 05:00 a.m UTC.

A look at the four-hour chart indicates that the bullion is hovering around the long-term 200-day EMA. At the same time, it is trading above the 25 and 50-day exponential moving averages. While the latter set-up is a bullish sign, the death cross formed in the past week remains. A death cross occurs when the long-term EMA (200-day EMA) crosses over the short-term one (50-day EMA) to the upside.

Based on these technical indicators, gold price will likely have its upward potential curbed. In the short term, the range between the resistance level of 1,815.82 and the 25-day EMA at 1,805.63 will be worth watching.

Even the bulls manage to break the aforementioned resistance, the metal’s upward movement will likely be curbed at January’s resistance level of 1,820. On the lower side, a move below the range’s lower border will have the bulls defend the crucial support at 1,800.

gold price
gold price