Gold (XAU/USD) recorded a significant turnaround Friday, approaching $4,130 after trading session lows near $4,044. The bounce was largely attributed to the release of US Consumer Price Index (CPI) data that was lower than anticipated. This has fueled new hopes of soon arriving interest rate cuts from the Federal Reserve. In short, gold’s short-term outlook is bearish. For one, it is trading below the 200-day, 50-day, and 8-day moving averages, and close to the 100-day.
If that’s the case, recent economic data should reinforce that expectation, with the Core CPI, which excludes volatile food and energy prices, increasing only 0.2% in October. This bump fell short of the expected 0.3% increase. This unexpected round of inflation optimism has markets buzzing about a more dovish monetary policy from the Federal Reserve. This change traditionally increases demand for gold, as an investment, too.
Gold’s technical indicators suggest a far gloomier scenario. The safe-haven asset is now fighting an uphill battle as it remains below the 21, 50, and 100-period SMAs on the 4-hour chart. The 100-SMA, at around $4,090, is serving as an immediate resistance level. Traders are watching this level very closely. If prices manage to hold over $4,150, they may pave the way to the next major resistance level at $4,200.
In continuation of this trend, the psychological support level of $4,000 is still an important factor for gold prices. According to analysts, a clear break underneath this level could send BTC through a deeper retracement towards the $3,900 area. Persistent geopolitical and economic uncertainties continue to weigh on market sentiment. This has led to an ever-increasing appetite for safe-haven assets such as gold. In addition to inflation concerns, the ongoing United States government shutdown has further intensified this demand as investors seek stability in turbulent times.
Gold stands to end its nine-week winning streak. This transition does a huge disservice to the realities it faces in the face of constantly changing market forces. The mix of a more dovish inflation print and lingering economic headwinds has made for a tricky market landscape. While this rebound may bring hope to the market, the bearish short-term outlook muddies the waters.