Gold sell

US inflation exerts pressure on gold

15 February 2023 169
US inflation exerts pressure on gold

Yesterday and today, gold prices showed almost no significant movement. Important data on the US CPI came out yesterday. There was high volatility in gold prices after the release of the data, but quotes couldn’t close the day in any one direction. If we look at other risk indicators, we will see an oil decline, uncertainty in the US stock market, and rising US bond yields.

As we know, the bond market is the smartest market in the world, and the growth of yields indicates a negative signal for other markets.

In January, US consumer inflation rose stronger than expected, which confirms the remaining inflationary pressure on the economy. Continued high inflation could make FRS increase the interest rates more aggressively. According to published data, the overall consumer price index (CPI) rose by 0.5% in January. This figure was the highest in three months. The main contributor to inflation was energy and housing costs. Annual inflation grew by 6.4%.

Traders forecast a quarter-point increase in the Fed's rate in June, as well as a higher peak rate.

Gold, which doesn’t generate a steady cash flow for its investors, historically has a negative reaction to the growth of an interest rate. 

Gold is coming down from its sideways movement, according to technical analysis of the hour timeframe. Last week, a similar exit was from the flag figure, which meant a continuation of the downward trend in gold.

Fundamental factors signal a continuation of the downward trend after the manifestation of high inflation in the US amid a strong labor market.

The support level at $1,824 will be a target of a decrease. There is a trade zone, as well as a technical target for the decline after exiting the trend. We can place a quite small stop-loss at $1862, this is a little above the high of the price on the way out of the trend. We set the small stop, as the level has already been broken down, and events that will lead to strong volatility in gold aren’t expected in the coming days.

Decrease in gold price:

Take profit — 1824

Stop-loss — 1862

This content is for informational purposes only and is not intended to be investing advice.

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