Gold Takes a Breather Before US Inflation Data Release

Published on: Mar 12, 2024|3 min read

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London: 12 March 2024 (TraderMade): Gold prices dipped slightly on Tuesday, taking a breather after a record-breaking run. This pullback comes ahead of the highly anticipated US Consumer Price Index (CPI) data release, which could significantly impact the yellow metal's future trajectory.

Key Takeaways

Gold prices retreated after hitting a record high of $2,194.99 last week. Investors await US CPI data to gauge the Federal Reserve's monetary policy path. A hotter-than-expected inflation reading could dampen hopes for rate cuts, potentially weakening gold.

Gold Pauses for Breath

Gold prices slipped by around 0.3% on Tuesday, following a nine-day winning streak that culminated in a record high. This pullback is attributed to profit-taking ahead of the crucial US CPI data release.

XAUUSD (Gold) Surges in Volatile Two Weeks, Pausing Before US Inflation Data

The price of gold (XAUUSD) experienced a significant upward trajectory over the last two weeks, from 27 February 2024 to 12 March 2024. However, the final days saw a slight pullback as the market awaited a crucial US inflation report.

Upward Climb

Start of Period (27 February): Gold opened at $2030.38 and closed at $2030.37, with minimal movement.
**Early Gains (28 February - 1 March): Prices rose steadily, closing at $2034.51 on 28 February and reaching $2083.50 by 1 March. This initial rise could be attributed to:
Anticipation of Fed Rate Cuts: Speculation that the Federal Reserve might begin cutting interest rates later in 2024 increased the appeal of non-interest-bearing gold.
Geopolitical Tensions: Ongoing global uncertainties could have driven investors towards safe-haven assets like gold.

Surge and Consolidation (4 March - 8 March):

Rapid Rise: The price of gold jumped significantly, reaching a record high of $2195.21 on 8 March. This surge could be explained by:
Confirmation of Rate Cut Expectations: Comments from Fed officials or economic data releases potentially reinforce the possibility of rate cuts.
Flight to Safety: Heightened geopolitical tensions or market volatility might have further increased demand for gold.
Consolidation: Prices remained near record highs but with some fluctuations, suggesting profit-taking by some investors.

XAUUSD Chart

Pre-Data Pause (11 March - 12 March):

Slight Pullback: Gold prices dipped slightly, closing at $2175.81 on 12 March. This decline could be due to:
Profit-taking: Investors are locking in gains after the significant price increase.
Cautiousness before US Inflation Data: The market likely adopted a wait-and-see approach before the release of the US CPI report, which could influence future Fed policy and, consequently, gold prices.

Overall

XAUUSD experienced a remarkable increase over the past two weeks, with a slight pause in the final days. The upcoming US inflation data will likely be a key driver for gold prices in the near future.

Focus on US Inflation

Investor focus has shifted entirely to the US CPI report scheduled for later today. A higher-than-expected inflation reading could signal a delay in the Federal Reserve's anticipated rate cuts, potentially weakening the appeal of non-interest-bearing gold. Conversely, a cooler CPI print could bolster hopes for an early rate cut, reigniting the rally in gold prices.

Long-Term Bullish Outlook

Despite the short-term pullback, several analysts maintain a bullish long-term outlook for gold. This optimism stems from the ongoing geopolitical tensions and the potential for a weaker global economy in 2024, factors that traditionally increase demand for safe-haven assets like gold.

The Verdict

Gold's near-term direction will hinge heavily on the outcome of the US CPI data release. A hot inflation number could trigger a sell-off, while a cooler reading could propel gold prices to new highs. Regardless of the immediate outcome, gold's long-term prospects remain promising due to the prevailing global uncertainties.