Gold futures are inching higher on Monday while putting in a mixed performance as traders continue to hover around the key $1795.00 – $1800.00 technical levels. Trader reaction to this area will set the near-term tone in the market. At his time, the trade under $1795.00 suggests a downside bias is developing.
At 08:56 GMT, December Comex gold futures are trading $1792.30, up $0.20 or -0.01%.
Fundamentally, control of the direction of the market is in the hands of U.S. Treasury investors and U.S. Dollar traders.
Other than a report on the Federal Budget Balance at 18:00 on Monday, there are no major economic releases. Nonetheless, investors are already preparing for Tuesday’s major report on U.S. Consumer Prices. This report takes on added importance due to the higher-than-expected U.S. Producer Price Index report released on Friday.
A stronger-than-expected CPI report will raise the chances of an earlier-than-expected tapering by the Federal Reserve. This form of tightening would be bearish for gold prices especially if it drive interest rates and the U.S. Dollar higher.
Gold Traders Eyeing US Inflation Data for Clarity on Timing of Fed’s Tapering Plans
Data released Friday showed that producer prices rose 0.7% in August and 8.3% year over year, which was the biggest annual increase since records were first kept in November 2010.
The closely watched consumer price index will be released on Tuesday, at which point the Street will see how much of the heightened costs are being passed along to consumers. Economists surveyed by FactSet are expecting the reading to show that consumer prices jumped 5.3% on an annual pace in August.
“Supply bottlenecks, inventory shortages, higher commodity prices, and higher shipping rates have all contributed to higher input costs,” noted Charlie Ripley, senior investment strategist for Allianz Investment Management.
“Friday’s data on wholesale prices should be eye-opening for the Fed, as inflation pressures still don’t appear to be easing and will likely continue to be felt by the consumer in the coming months,” he added.
The key area to watch is $1795.00 to $1800.00. An upside bias could develop on a sustained move over $1800.00. The downside bias will continue on a sustained move under $1795.00.
Traders will continue to get their cues from the Treasury market and U.S. Dollar.
U.S. 10-year and 30-year Treasury yields fell slightly on Monday morning to start the week. This is helping to underpin prices.
Meanwhile, a stronger U.S. Dollar may be capping gains with investors wary of the Federal Reserve beginning its exit from support-supportive policy even as cases of the coronavirus surge.
The greenback closed out its best week in three weeks on Friday as it benefited from safety flows and the policy outlook lifting yields on U.S. Treasuries.