Fundamental Daily Gold Price Forecast - Trader Caution Ahead of CPI Report

A short time before the release of the U.S. consumer price inflation report at 13:30 GMT, gold futures are inching lower. The market movement shows that the main players are sitting on the sidelines in anticipation of data that may reveal whether the Federal Reserve would scale down its aggressive rate hikes or continue along the same path for a longer duration.

At 13:00 GMT, the Comex gold price for December is $1712.60, down $1.10, or -0.06%. The SPDR Gold Shares ETF (GLD) closed Wednesday at $158.68, down $0.77 or -0.48%.

You should only trade with capital that you can afford to lose while trading derivatives. The trading of derivatives may not be suitable for all investors; thus, you should ensure that you fully comprehend the risks involved and, if necessary, seek independent counsel. Before entering into a transaction with us, a Product Disclosure Statement (PDS) can be received through this website or upon request from our offices and should be reviewed. Raw Spread accounts offer spreads beginning at 0 pips and commissions of $3.50 every 100k traded. Spreads on standard accounts begin at 1 pip with no additional commission fees. CFD index spreads begin at 0.4 points. This information is not intended for inhabitants of any country or jurisdiction where distribution or use would violate local law or regulation.

Because of the contradictory signals from the Treasury market and the U.S. Dollar, gold dealers are likely avoiding the market before to the CPI announcement.

Treasury yields are declining, which is normally a bullish indicator for gold prices. However, the U.S. Dollar is rising, which often limits the price of gold.

It is anticipated that headline inflation will come in at 0.6% for the month, resulting in an annual rate of 7.9%. Estimates indicate that core inflation increased by 0.5% in October, resulting in an annualized rate of 6.5%.

Given the massive surge, gold traders appeared to have been betting on lower-than-anticipated inflation for at least a week. This was supported by the CME's FedWatch tool, which indicated that traders were approximately 56% certain that the Fed would not raise rates by more than 50 basis points at its December meeting.

However, the lack of continuation to the upside and the recovery of the U.S. dollar indicate that the tone may be shifting. Given that five of the last six reports have provided positive surprises, it is difficult to buck the trend.

Traders will bet that the Federal Reserve will have to raise interest rates either more quickly or for a longer period of time if inflation data exceeds expectations. This will likely cause gold prices to fall sharply.

A Fed member supported this notion on Wednesday. President of the Federal Reserve Bank of Minneapolis Neel Kashkari stated that it is "entirely premature" to discuss any pivot away from the Fed's current policy tightening, although he appeared to support the possibility of adjusting the magnitude of future rate hikes.