Gold futures settled significantly higher today, as the US dollar fell sharply after weak consumer price inflation data helped calm concerns about the outlook for US interest rates.
Accordingly, the opportunity was good for the XAU/USD gold price in a strong upward rebound, with gains at the $1824 resistance level, the highest for the yellow metal price in six months. It then settled around the $1810 resistance level an ounce, at a time when the markets are cautiously awaiting the update of the US Central Bank’s monetary policy decisions.
Monetary Policies to be Announced
Yesterday, the Labor Department report said that the US Consumer Price Index rose by 0.1% in November, after rising by 0.4% in October. Economists had expected US consumer prices to rise by 0.3%. The report also showed the annual growth rate of US consumer prices slowed to 7.1% in November from 7.7% in October. So-called core inflation, which excludes volatile food and energy costs and which the Fed follows closely, slowed to 6% from a year earlier. From October to November, core prices increased by 0.2% - the smallest increase since August 2021.
Finally, the latest figures provide the strongest evidence, yet that US inflation is steadily slowing from the price acceleration that first hit nearly 18 months ago and reached a four-decade high earlier this year.
For their part, economists say that the latest inflation figures indicate the possibility of some relief in the coming months. “Inflation was horrific in 2022, but the outlook for 2023 is much better,” said Bill Adams, chief economist at Comerica Bank. And “supply chains are working better, and business inventories are higher, ending most of the shortages that fueled inflation in 2020.”
For his part, US President Joe Biden called the inflation report "welcome news for families across the country" and noted that lower car and toy prices should benefit holiday shoppers. However, Biden acknowledged that inflation may not return to "normal levels" until the end of next year.
The Fed, which is due to announce monetary policy on Wednesday, is still likely to raise the US interest rate by another 50 basis points, but slower rate growth may ease recent concerns about future rate hikes. Prior to that, the DXY fell to 103.59 after the Labor Department released inflation data. Despite recovering to 103.99, the US index is still deep in negative territory with a loss of around 1.1%.
XAU/USD gold price forecast today:
- The XAU/USD gold price moved to its recent gains, which was sufficient to push the technical indicators towards overbought levels and calm the US Federal Reserve’s policy statement today.
- This may weaken the US dollar more, and therefore the move towards the resistance levels 1832 and 1845 dollars, respectively.
- It will be important for the current bullish general trend, and at the same time, it will be good opportunities to think about selling, waiting for the moment to sell to take profits.
On the other hand, the XAU/USD gold price will not have a chance in the downside trend without moving towards the $1775 support level again. The price of gold may remain moving in a narrow range today, until the moment of the reaction from the update of the monetary policy decisions of the US Federal Reserve and the statements of the bank’s governor, Jerome Powell.
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