- The US will release a crucial economic report showing the state of inflation.
- US price pressures might increase by 2.3%, below the previous month’s 2.5% increase.
- Signs that the Israel-Hezbollah war would end in a ceasefire agreement weighed on gold.
The gold outlook indicates a slight price rebound from recent lows as market participants prepare for the US CPI report. Gold reached a new low on Tuesday as the probability of a ceasefire in the war between Israel and Hezbollah reduced demand for safe-haven assets.
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On Thursday, the US will release a crucial economic report showing the state of inflation in September. According to forecasts, price pressures increased by 2.3%, below the previous month’s 2.5% increase. Meanwhile, the monthly figure might come in at 0.1%, a drop from August’s 0.2%.
The inflation report will continue shaping the outlook for the next Fed policy moves. Currently, markets are pricing an 85% chance that the US central bank will lower borrowing costs by 25-bps. This is a big drop from a few weeks ago when traders expected another massive cut. As a result, gold has fallen with the prospects of a gradual easing cycle.
Meanwhile, the FOMC minutes showed agreement with the massive rate cut in September. However, these views came well before the blockbuster September jobs report. Employment figures showed a resilient labor market, easing pressure on the Fed to lower borrowing costs.
Meanwhile, there were signs that the Israel-Hezbollah war would end in a ceasefire agreement. Middle East tensions have kept a steady flow of cash to the safe-haven yellow metal. Therefore, any signs that tensions might ease weigh on prices.
Gold key events today
- US core CPI m/m
- US CPI m/m
- US CPI y/y
- US unemployment claims
Gold technical outlook: Bears make new low below 2625.58
On the technical side, gold has broken below the 2625.58 support level with a massive candle. At the same time, it trades below the 30-SMA with the RSI in bearish territory. Therefore, gold’s trend has reversed from bullish to bearish.
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However, it is still too early to say whether the downtrend will continue. Bears must start making lower highs and lows to confirm a downtrend. For now, the price might revisit the 2625.58 level before continuing lower or breaking above the SMA. A downtrend would allow the price to reach the 2550.44 support level.
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Saqib Iqbal
