For the record – gold prices are volatile at the moment. Investors are particularly focused on tonight’s Consumer Price Index (CPI) release. This week, gold has shown an interesting combination of firmness and fear. Even now, it’s pretty well oscillating in a tight range as it tests critical short-term price levels. The market is looking at possible targets from $3,295.79 up to $3,298.03. The big resistance and support levels continue to move the markets and guide buyer/seller behavior.
Gold’s price action has been characterized by a recent breakthrough below the week’s opening gap, indicating a shift in market sentiment. Following last week’s whipsaw action, with gold rising and falling over a thousand dollars within a few days, gold has settled down to start this week. This chillin’ cowboy behavior—as some have called it—gives traders a chance to catch their breath before some key economic data that could shake things up even more.
Current Price Action and Key Levels
Currently gold is testing the $3,271.18 level. Some analysts though, are waiting for signs that it could plunge further into the liquidity void to retest $3,300 and $3,280 ranges. This range is very important to traders. A break here could set off a larger decline, especially if inflation data is the upside surprise so many are expecting. The market is rightfully on alert, gold’s recent trading range is showing signs of cautious optimism in the face of mixed signals.
The $3,320-$3,340 Fair Value Gap (FVG) level has been key for gold’s recent price action. Should gold manage to break above this range, the breakout could indicate the beginning of a bullish trend with higher targets ahead. If sticky inflation is really sticking around, it would push prices downward, possibly retesting the $3,271 level. Even with these risks, the big bullish picture is still very much alive as long as the $3,271.18 level holds the line in terms of losing ground.
CPI Impact on Gold Prices
That is why investors are looking more closely at the next CPI report. They predict to see core inflation increasing to 2.9% year-over-year, a minor tick up from April’s 2.8%. Weaker CPI data could trigger a breakout in gold prices, targeting $3,434. On the flip side, if the inflation print is stronger than expected, that could prompt investors to reassess their bullish bets.
The reasons why investors flock to gold Gold has long been a terrific hedge against inflation. When inflation begins to rear its ugly head, people flock to this shiny metal like nothing else. Conversely, if inflation were to increase for a longer period of time than predicted, gold prices would begin to decline. This might force them below the bottom support levels.
Looking Ahead: Scenarios to Consider
Market participants are preparing for the CPI report. They’re modeling different scenarios that might drive gold prices up or down in the near term. The possibility to break above the $3,350 resistance level is still on the table, contingent on suitable bullish economic data. If inflation data highlights those underlying pressures, it may put markets in a position of having to reassess their current positions. This change will put downward pressure on prices.