On Thursday, XAU/USD, the price of gold priced in US dollars, displayed a substantially improved trade tone. It managed to cling onto its intraday advance in the $4,140 area. A cautious investor is still waiting to see early warning signs in key economic indicators. They are particularly eyeing the September Consumer Price Index (CPI), scheduled for release this Friday. The core annual reading of the CPI is projected to align with August’s figure of 3.1%, indicating a slight uptick from the previous year’s 2.9%.
Market analysts are watching inflation trends, with the CPI likely to show a 3.1% year-over-year increase. This widely expected increase in inflation might be enough to begin shifting Federal Reserve policy and market sentiment. These recent data points have combined to make inflation the most dominant issue. Sales of previously owned homes in the United States surged 1.5% in September, much stronger than the prior month’s 0.2% increase. The expected monthly increase of 0.4% would be another testament to the housing market’s resilience.
On top of that, the October Kansas Fed Manufacturing Activity Index has snapped back very strongly, climbing from 4 all the way up to 15. For a more optimistic economic picture, look no further than the recent resurgence in manufacturing activity. This change may have profound implications for gold prices.
On the technical front, XAU/USD is confronted by massive resistance levels at $4,061.20, $4,085.70 and $4,110.00. On Wednesday, the price reacted aggressively, staying well above the 20 Simple Moving Average (SMA). It further extended its recovery as it jumped past the overall bullish 100 SMA. It is still under a bearish 20 SMA that acts as resistance at $4,173. These technical indicators are very important to traders as they gauge the possible direction of price movement in reaction to the economic data still to come.
XAU/USD support levels are set at $4,115.75, $4,000.00 and $3,986.45. Market participants closely watch these levels because they often lead to reversals or continuations of existing trends.