Gold outlook: Gold rises as traders prepare for US CPI

• The US will release a crucial economic report showing the state of inflation.

• U.S. price pressures could rise 2.3 percent, below the previous month’s 2.5 percent gain.

• Signs that the Israel-Hezbollah war would end with a cease-fire agreement weighed on gold.

The outlook for gold points to a slight price recovery from recent lows as market participants brace for the US CPI report. Gold hit a new low on Tuesday as the likelihood 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. Price pressures were forecast to rise 2.3%, below the previous month’s 2.5% increase. Meanwhile, the monthly figure could come in at 0.1%, down from 0.2% in August.

The inflation report will continue to shape the outlook for the Fed’s next policy moves. Markets currently see an 85% chance that the US central bank will cut borrowing costs by 25 basis points. This is a big drop from a few weeks ago when traders were expecting another massive discount. As a result, gold fell on the prospects of a gradual relaxation cycle.

Meanwhile, the FOMC minutes showed agreement to the massive rate cut in September. However, these views came well before September’s successful 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 with a cease-fire agreement. Tensions in the Middle East have kept cash flowing steadily into the safe-haven yellow metal. Therefore, any sign that tensions might ease affects prices.

Key Gold Events Today

• US core CPI m/m
• US CPI m/m
• US CPI y/y
• US Jobless Claims

Gold Technical Outlook: Bears make new low below 2625.58

Technically, gold fell below the 2625.58 support level with a massive candle. At the same time, it is trading below the 30-SMA with the RSI in bearish territory. Therefore, gold’s trend reversed from bullish to bearish.

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However, it is still too early to tell if the downward trend will continue. Bears need to start making lower highs and lows to confirm a downtrend. For now, the price may bounce back to the 2625.58 level before continuing lower or breaking the SMA. A downtrend would allow the price to reach the 2550.44 support level.

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