The focus shifts to the US CPI due on Thursday
Gold prices turned marginally negative on Tuesday as the dollar regains ground nearly across the board. Risk sentiment looks mixed, with European stocks clinging to record highs while US stock index futures struggle for direction ahead of the opening bell.
The precious metal peaked at $1,916 last week and has been hesitating since then. The prices briefly dipped to $1,855 for the first time since May 19 on Friday before bouncing. Today, the XAUUSD pair oscillates around the $1,900 figure, struggling to overcome this immediate barrier as dollar demand picked up again while the focus shifts to the US CPI due on Thursday. At that, the metal remains confined within a familiar range. On the negative side, renewed US-China concerns lift the safe-haven appeal of the dollar at gold’s expense.
Traders await the data to gauge the inflationary pressures and the Federal Reserve’s stance on monetary policy. Of note, inflation expectations fell to a six-week low ahead of the key CPI report. If the data exceeds expectations, the dollar would rally across the board, thus sending the bullion lower.
In the short term, a decisive break above $1,900 could bring the multi-month tops of $1916 back on the buyers’ radars. On the positive side, the yellow metal has been holding above the ascending 20-DMA since the start of the week. As long as the prices stay above this moving average (today at $1,880), downside risks are limited in the short term.
A break below the 20-DMA would bring the $1,855 area back into market focus, followed by the 100-DMA at $1,842 last seen on May 17. However, it looks like the prices will stay afloat in the short term as dollar recovery looks fragile at this stage. If the yellow metal manages to exceed the $1,900 figure, the $1,910 immediate resistance will come into market focus.