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Market Update: Gold’s Run Hanging on Tonight’s CPI?

June 10, 2021
by Joseph Jeffriess, Market Analyst

Hi traders, today’s where looking at the Gold’s daily price chart and primarily on the current extension that started in late March.

The main question I’m asking when looking at Gold’s daily chart is if this current run is going to continue? We’ve seen a solid move up since April. Buyers added just over 14% from the March 31 low to the June 1 high. Since this extension got going we’ve seen a downtrend break and a new fast trend set up. We are yet to see a decent reaction but currently, we have started to see signs of exhaustion set in as sellers have set a lower high this week.

US CPI Data & The Inflation Worries

That brings us to today’s CPI data. Higher than expected could boost Gold as this rally has been running off inflation worries that have continued to gather pace in the last several months. Today’s CPI data is expected to come in at CPI 0.4% and Core CPI 0.5%. These numbers are a fair amount lower than the last data.

If you listen to the chatter inflation continues to be an issue in the US. Tonight’s data could potentially be a market mover as if we see a repeat of last month with another shock rise that’s going to influence the USD and Gold.

If you look back to May 12 Gold declined after the shock data but started a 9-day advance the day after. Will history repeat?

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What Does The Chart Tell Us

Looking at the daily chart below, depending on unseen fundamentals we looking at road maps in the short term. One, influences are supportive and we see a fast extension higher continuing the current fast trend. Two influences turn for buyers, and we see a medium-term move lower develop that could get back down to the main trend and 50% Fibonacci point. Markets due like to return to the 38 and 50% points before we may see a resumption in trend. Due to time in the current trend and how aggressively it broke the downtrend, we can’t give up on this move just yet.

Inflation is a factor but if you compare Gold to the USDCHF you will see just how negatively correlated these moves are at the moment. This brings me back to the USD being the main driver here at the moment. So tonight’s CPI is as much about the short to medium term of the USD as it is about inflation for Gold’s price.

Gold Daily Chart

Going back to the point about the current run you will notice that both hypotheticals end with rallies higher. That’s staying with the idea that the current trend will continue. This could change so please don’t take that as any type of hard-set forecast!

Both of these hypotheticals end around the $1960-1970 area. If price did get back there we’d expect some sort of resistance. Gold’s price has not closed above $1970 since the 18th of August 2020.

So let’s see what today’s CPI data brings to the USD and Gold. US CPI and Core CPI data is due today at 10:30 pm.

All times are AEST.