Gold price headed lower on Tuesday, as its ten-day rally cooled ahead of the US CPI data release. The yellow metal traded at $2176 per ounce, down by -0.28% at the spot market, at the time of writing. Similarly, gold futures edged lower by -0.23%, to trade at $2183. The commodity’s march towards $2200 has been halted for now, but the safe haven sentiment around it remains strong.
The US Core CPI (excluding food and energy) data for February is expected to show a decline in the inflation rate from 0.4% to 0.3% month-on-month. However, the overall inflation rate is forecast to rise by 0.1% to 0.4% month-on month. Furthermore, the year-on-year headline inflation is forecast to stay unchanged at 3.1%, which is still above the 2% rate targeted by the Fed.
The Fed has already pronounced itself on a likelihood of a rate cut this year if inflation figures are proven to have come down to sustainable levels. This has sent the market betting on a June rate cut, creating a downside momentum around the dollar. In the context of XAUUSD, the dovish sentiments by the Fed have exerted downward pressure on US Treasuries, leading to a significant decline in yields and swinging the scales in favour of gold.
Safe haven gold could yet find some upside momentum from the uncertainty surrounding the Israel-Hamas ceasefire negotiations ahead of the Ramadhan. Earlier in February, Israel’s war cabinet member Benny Gantz had indicated that a ground offensive into Rafah would happen if the remaining hostages were not released by March 10th. The passing of the deadline could help spur up demand for gold.
Technical analysis
Gold prices are currently consolidating, and buyers will need to push for control above the $2185 pivot to support upside momentum. If they succeed in doing that, they could break the $2195 resistance and test the next resistance at $2205. However, the momentum will favour the seller as long as resistance remains below the $2185 pivot. That could see XAUUSD break the $2168 support, thus invalidating the bullish narrative and setting the stage to head lower to $2162.
