The $4,200 mark has been a key battleground for gold in the past two weeks, and it could once again be part of the trading action today. The precious metal will face up against a big test from the US CPI report, with the inflation numbers having the potential to draw a broader market reaction that could impact gold.
While there are watchful eyes on the figure level, there’s a little more to the technical picture than just that.
Looking at the hourly chart:
Gold’s advance from Friday last week has stalled around the $4,200 to $4,220 region before steadying itself closer to $4,150-60 levels in the latest pullback. That coincides with the 100-hour (red line) and 200-hour (blue line) moving averages, which are now converging around the same area. And for now, buyers have at least managed to put up a bit of a fight here.
The bigger challenge though remains getting back above $4,200 and sustaining a break beyond that. The $4,220 region will be another hurdle before buyers can even contemplate chasing the next leg higher in gold.
And that is where the US CPI report later today could come into play. A softer-than-expected core inflation reading could offer gold some relief, particularly if Treasury yields and the dollar fall in response to that.
Having said that, a brief spike above $4,200 isn’t exactly going to be convincing enough, at least to me, to signal that the tide has turned.
The daily chart paints a more cautious picture in that regard. The $4,200-20 region will be the first key hurdle and in getting past that, gold buyers will at least see the chart turn to be more constructive. But the next hurdle isn’t that far away, with the 100-day moving average (red line) at $4,249 adding another layer of resistance.
On the flip side, a fall back in gold below $4,150 will then put the focus on the region around $4,100-17 closer to the 78.6 Fib retracement level. A break of that will potentially free up the path for the precious metal to dive lower towards $4,000 next.
Looking to the US CPI report later today, it will be more than just the reaction to the initial price spike on the inflation numbers. For gold, it is whether buyers can actually hold on to any gains and reclaim those overhead levels. Otherwise, we’ll be back to talking about the same battleground again in the aftermath or perhaps even debate about how another failed push higher could leave gold vulnerable to a deeper retreat.
This article was written by Justin Low at investinglive.com.