FX.co ★ CPI data could determine gold prices today

On Tuesday, gold failed to break the key resistance level of $1,835. However, the asset ended the day in positive territory, reaching September's high.

The precious metal tested the resistance at $1,835 three times in mid-summer 2021, but failed to overcome it.

Unless gold achieves a desired breakout, the market would not have a clear trend. The asset should break the level of $1,835 to generate new bullish momentum in the market.

The breakout would put an end to a long series of lows and would allow gold to return to the May high of $1,916, analyst Adam Button said.

Currently, the price hasn't yet managed to rise above the level of $1,835. On Tuesday, gold closed with an increase below it. Gold made gains for the fourth straight trading session - the longest uptrend since the 5-day rise in early July.

The asset gained 0.2% or $2.80 compared to 0.6% on Monday and reached $1,830.80 per ounce, matching the September high.

Yesterday, gold found support in the US PPI data for October. Producer prices rose by 0.6% from 0.5% in September, meeting market expectations. The PPI went up by 8.6% on a yearly basis in October. Economists forecasted it would increase by 8.7%.

Producer prices are slightly lower than anticipated, but the period of higher overall inflationary pressure could persist further, boosting gold as a hedge against inflation.

Despite being in line with market expectations, the PPI report did not alleviate concerns about rising inflationary pressures, analyst Jim Wyckoff said. "It appears metals traders are now focusing more on the bullish aspects of rising inflation, and less on the Federal Reserve's monetary policy — at least for now", he noted.

Today, markets eye the US CPI report for October. Consumer prices are expected to rise by 0.6%, compared to 0.4% in September.

Currently, the US labor market remains tight, and the global supply chain issue is still unsolved, hindering microchip production. These factors could easily result in a higher percentage increase in the CPI forecast. In this scenario, "the Federal Reserve will be hard-pressed to maintain its dovish stance in regards to keeping the current Fed funds rate between zero and a 1/4%", analyst Gary Wagner commented.

An earlier interest rate hike to alleviate inflationary pressure would push gold down.

The asset's current rally was triggered by easing concerns about the Fed raising interest rates earlier than anticipated. However, renewed speculation about a more hawkish course of the Federal Reserve could send gold prices below $1,800, amid an increase of US treasury bond yields.

On Tuesday, the 10-year US note yield fell to 1.4271%, boosting the precious metal from the session low of $1,821.

Gold began to edge back on Wednesday morning, falling below $1,830. Today is a key day for the asset. The release of the US CPI report would determine the price's movement in the short term.

According to Chintan Karnani, director of research at Insignia Consultants, gold would need a daily close above $1,835 after the CPI release in order to target $1,900 or even $2,000. A close below $1,835 would put bears in charge, with $1,760 and $1,717 as short-term price targets, Karnani said.