- The US will release a key economic report showing the state of inflation.
- US price pressures could rise by 2.3%, below the previous month’s 2.5% increase.
- Signs that the war between Israel and Hezbollah will end with a cease-fire agreement weighed on gold.
The outlook for gold points to a slight price recovery from recent lows as market participants prepare for the US CPI report. Gold hit new lows on Tuesday as the prospect of a ceasefire in the war between Israel and Hezbollah dampened demand for safe-haven assets.
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On Thursday, the US will release a key economic report showing the state of inflation in September. According to forecasts, price pressures rose by 2.3%, below the previous month’s 2.5% increase. Meanwhile, the monthly figure could be 0.1%, down from August’s 0.2%.
The inflation report will continue to shape the outlook for the Fed’s next policy moves. Currently, markets estimate an 85% chance that the US central bank will cut borrowing costs by 25 basis points. This is a big drop from a few weeks ago when traders were expecting another huge drop. As a result, gold fell on the prospect of a gradual easing of the cycle.
Meanwhile, FOMC minutes showed agreement with a massive rate cut in September. However, these views emerged well before September’s episodic jobs report. Employment data showed a resilient labor market, easing pressure on the Fed to cut borrowing costs.
Meanwhile, there were signs that the Israel-Hezbollah war would end with a cease-fire agreement. Tensions in the Middle East have kept cash flowing steadily into the safe-haven yellow metal. Therefore, any signs that tensions could ease affect prices.
Gold key events today
- USA core CPI m/m
- US CPI m/m
- US CPI y/y
- US unemployment claims
Technical Outlook for Gold: Bears are making a new low below 2625.58
On the technical side, gold broke below the 2625.58 support level with a massive candle. At the same time, it is trading below the 30-SMA with the RSI in bearish territory. Because of this, the gold trend reversed from bullish to bearish.
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However, it is still too early to say whether the downward trend will continue. Bears need to start making lower highs and lows to confirm the downtrend. For now, the price could retrace to the 2625.58 level before continuing lower or breaking above the SMA. A downtrend would allow the price to reach the support level of 2550.44.
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