Gold Softens from Highs
Gold prices are a little cooler through the middle of the week following a reversal from yesterday’s highs. After testing the 1.61% fib extension level around 2.949.88, the futures market as seen reversing to end the day lower. The move comes in response to comments from Fed’s Powell yesterday which further diluted near-term Fed easing expectations. Speaking during the first session of his two-day semi-annual testimony to congress, Powell said that progress had been made on inflation but the bank is no rush to cut rates again and can afford to see more progress. Commenting on jobs, he said the labour market has stabilised and the US is not in a recession.
Inflation is Key: CPI Due Today
The takeaway from the testimony is essentially that the Fed is on hold until inflation starts to cool again. With that in mind today’s US inflation readings will be key for near-term direction in markets. The market is looking for headline annualised CPI to remain unchanged at 2.9%. If seen at this level or above, gold prices are likely to remain pressured with USD likely to find a fresh bid, as traders further scale back Fed easing expectations. However, if we see any undershooting, this could serve as evidence that the recent inflationary spike has peaked, with gold likely to rally as USD falls on revived near-term easing prospects. Ahead of the data, current CME pricing reflects the market view that the Fed wont ease until July.
Technical Views
Gold
The rally in gold has stalled for now into a test of the 1.61% fib extension level around 2,949.88. With momentum studies cooling, a deeper correction is feasible though the broader bull outlook remains while gold holds above the broken prior highs at 2,789.40. Ahead of that level we have interim support at 2,859.15 also.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.