Gold Price Talking Points
The price of gold climbs to a fresh monthly high ($1723) as it extends the advance following the US Non-Farm Payrolls (NFP) report, but the recent rise in the precious metal may unravel if it fails to push above the October high ($1730).
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Gold Price Struggles to Push Above October High Ahead of US CPI
The price of gold trades above the 50-Day SMA ($1673) after defending the yearly low ($1615), and bullion may no longer respond to the negative slope in the moving average as it clears the opening range for November.
At the same time, the update to the US Consumer Price Index (CPI) may influence the near-term outlook for bullion as both the headline and core reading are expected to narrow in October, and signs of slowing inflation may push the Federal Reserve to adjust its approach in managing monetary policy in an effort to foster a soft-landing for the economy.
As a result, speculation for a smaller Fed rate hike may prop up the price of gold ahead of the next interest rate decision on December 14, but evidence of sticky inflation may put pressure on the Federal Open Market Committee (FOMC) to pursue a highly restrictive policy as Chairman Jerome Powell insists that “it’s very premature in my view to think about or be talking about pausing our rate hike.”
In turn, a stronger-than-expected CPI print may drag on bullion as it encourages the FOMC to implement another 75bp rate hike in December, and it remains to be seen if Fed officials will project a steeper path for US interest rates with the central bank slated to update the Summary of Economic Projections (SEP) at its last meeting for 2022.
With that said, a downtick in both the headline and core US CPI may lead to a further rise in the price of gold as it fuels speculation for a smaller Fed rate hike, but the precious metal may struggle to retain the advance from earlier this month if it fails to clear the October high ($1730).
Gold Price Daily Chart
Source: Trading View
- The price of gold clears the opening range for November after defending the yearly low ($1615), and the precious metal may no longer respond to the negative slope in the 50-Day SMA ($1673) as it holds above the moving average.
- A break/close above the $1726 (38.2% retracement) may push the price of gold above the October high ($1730), with a move above the September high ($1735) opening up the $1762 (78.6% expansion) to $1763 (50% retracement) region.
- However, failure to clear the October high ($1730) may push the price of gold back towards the $1690 (61.8% retracement) to $1695 (61.8% expansion) area, with the next region of interest coming in around $1670 (50% expansion).
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— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong