Selling gold ahead of correction on strong inflation data

Looking at today's global financial news headlines, the focus is on three main topics -- Trump's trade duties, Powell's Senate hearing today, and January's inflation report.

The new administration's protectionist measures are advantageous for some US companies in protected industries, but they put an additional pressure on importers and private consumers, as higher prices will ultimately hit ordinary Americans.

Judging by the hot topics on the news agenda, the investment community is now trying to determine how much of Trump's trade policy consists of electoral populism and how much of pragmatic decisions. Similar assessments lawmakers are awaiting today from Jerome Powell, he is expected to give his detailed “technocratic” vision of the consequences of the President's initiatives for the US economy and the financial sector.

If the Fed's assessment matches the CPI data, it will provide a strong signal. In other words, if the Fed emphasizes the high risks of a trade war and inflation figures confirm this fact, the pause in monetary easing will become more evident.

Such a reversal in monetary policy would boost the US dollar and cause a short-term weakening in gold, which does not earn interest income unlike investments in Treasuries.

Taking a look at gold's daily chart, the target for a technical bearish correction to the support level of 2,800 is in sight.

The overall recommendation is to buy gold on the condition that the US CPI (month-on-month) will be higher than 0.4%, and higher than 3.1% year-on-year.

Profits should be taken at the level of 2,800. A Stop loss could be set at the level of 2,970.

The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.