Gold’s Fate Hangs in the Balance Ahead of Crucial Inflation Report
The latest inflation figures have sent shockwaves through the market, with policymakers adopting a cautious tone. This bearish sentiment is weighing heavily on gold prices, which could face a slow and gradual rate-cutting cycle.
A Glimpse into the Future: October CPI Figures
Economists predict that October’s US CPI figures will mirror the previous month’s, with the core CPI increasing by 0.3% and the CPI by 0.2%. The annual figure is expected to rise by 2.6%, up from September’s 2.4% increase. These numbers could have significant implications for gold prices.
Trump’s Election Win: A Game-Changer for Gold
Donald Trump’s surprise election win has altered the outlook for the US economy and inflation. His policies aim to boost economic growth, which could lead to higher inflation. This, in turn, might stop the Fed from cutting borrowing costs, ultimately hurting gold prices. When interest rates rise, gold loses its appeal, and demand drops, causing prices to decline.
Market Expectations: A Rate Cut in December?
Markets are repricing expected rate cuts for 2025, with the Fed potentially cutting rates less than previously anticipated. The decision to cut rates in December largely depends on October’s inflation figures. If inflation exceeds expectations, rate-cut expectations will dwindle, and gold prices will plummet. Conversely, if inflation is softer than expected, gold will rebound, solidifying bets for a December rate cut.
Technical Analysis: A Bearish Trend Takes Hold
Gold is currently in a developed downtrend on the 4-hour chart, with a recent reversal at a new peak. Although bulls made a higher high, the RSI made a lower one, indicating fading momentum. Bears have since taken charge, breaking below the 22-SMA support and retesting it before dropping further. The price has made impulsive moves to new lows, with corrective moves pausing at the 22-SMA resistance.
Support and Resistance Levels
Key support levels include 2602.35, 2600.15, 2550.36, and 2450.26. Resistance levels to watch are 2780.66 and 2650.69.
The Road Ahead for Gold
Gold has had a remarkable year, driven by rate-cut optimism. However, the outlook for rate cuts has dimmed since Trump’s election win. While there is still hope that incoming data might support the need for rate cuts in the short term, gold might suffer in the long run under Trump’s presidency. The upcoming US consumer inflation report will provide crucial clues for the December Fed meeting, making it a pivotal moment for gold prices.
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