According to market analyst Neils Christensen, the gold market continues to see technical selling pressure and finds little bullish bias following the warmer-than-expected inflation data.
US CPI came in at 7.5%, exceeding expectations, eyes on the Fed
cryptocoin.com On Thursday, the US Department of Labor announced that the US Consumer Price Index rose 0.6% in January after gaining 0.5% in December. Economists forecast an increase of 0.4%, with data beating consensus estimates. Annual inflation was also much warmer than expected, reaching 40-year highs again. Some economists were preparing for inflation to rise to 7.3%. Meanwhile, core CPI also rose 0.6% last month, after rising 0.6% in December.
According to Neils Christensen, the gold market is not overreacting to the latest inflation data as it has seen technical selling pressure after Wednesday’s climb above the initial resistance at $1,830. April gold futures were last traded at $1,824.40, down 0.66% daily. Some analysts say that the gold market has not caught a bid as the latest inflation data raise expectations for the Fed’s aggressive stance next month. Forecasts for a 50 basis point hike in March continue to solidify, and markets are now pricing in the potential for six rate hikes this year.
“Broad-based price hikes solidify the Fed’s hawkish stance and increase the urgency of rate hikes,” CIBC senior economist Katherine Judge comments. Andrew Hunter, senior US economist at Capital Economics, says January inflation data could represent the most important sign of the year as global supply chain problems begin to ease. However, he adds that although prices are close to the peak, they will remain high until 2022.
While we expect more positive base effects and partial easing of supply shortages to bring core inflation down this year, this data shows that the Fed will remain well above its target for a while.
Gold futures prices are hovering near daily lows in early US trading on Thursday, just after the hot, 40-year high of key US inflation data. The data above estimates fall into the camp of Fed hawks who want to see an aggressive increase in interest rates this year. According to senior analyst Jim Wyckoff, US Treasury rates rose after the report, which helped put pressure on precious metals markets.
Crude oil will be a crucial market for gold traders to watch in the coming months
Bloomberg interviewed a Goldman Sachs analyst, Jeff Currie, this week, noting that the main crude commodity futures markets are currently seeing the most ‘rollback’ of 28 markets since 1997-19. Retrospective means that nearby futures trade at a higher premium than deferred contracts. Generally, deferred futures are priced higher due to the carry premium. The retracement shows strong short-term demand for the commodity. Jeff Currie comments:
We’re all done, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it, we’re done. Futures curves are priced in shortages whose analogues have not been seen in 30 years.
Crude oil prices lead the rise in crude commodity prices. Therefore, Jim Wycko states that crude oil will be a very important market for metals traders to watch in the coming months. In major foreign markets today, crude oil prices are higher, trading around $90.50 a barrel. The US dollar index rose earlier today and the US 10-year Treasury yield is now at 1.994%, a two-year high.
Gold prices technical analysis
Technically, Jim Wyckoff says April gold bulls generally have a short-term technical advantage and have had a good week. According to the analyst, the bulls’ next upside price target is to close February futures contracts above the solid resistance at the January high of $1,856.70, while the bears’ next short-term bearish price target is to set futures prices above solid technical support at the January low of $1,780.60. push under. The analyst draws attention to the following technical levels:
Initial resistance is seen at the nightly high at $1,837.30 followed by $1,850. Initial support is seen at $1,816 Tuesday’s low and then this week’s low at $1,807.50.
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