Gold prices held steady on Wednesday, helped by a slight pullback in
dollar, while investors awaited U.S. inflation data to gauge the Federal
Reserve’s path on normalizing policy.
Spot gold was little changed at $1,760.26 per ounce by 0305 GMT, while U.S. gold futures rose 0.1% to $1,760.60.
The dollar index, which measures the greenback against six rivals,
was down 0.2%, easing off from an over one-year high hit on Tuesday.
“We’re going to get U.S CPI data as well as those critical minutes
from the September FOMC meeting so I think there is capacity there for
gold to get a directional catalyst after this period of consolidation,”
DailyFX currency strategist Ilya Spivak said.
“If CPI registers hotter, then we are probably looking at expectations that the Fed could need to move faster in raising rates.”
The U.S. consumer price inflation data is due at 1230 GMT, while
the minutes from Fed’s Sept. 21-22 policy meeting will be released at
1800 GMT.
Three Fed policymakers said on Tuesday the economy has healed
enough for the central bank to begin to withdraw its crisis-era support,
cementing expectations the Fed will start tapering as soon as next
month.
As inflationary pressures mount worldwide, money markets are
charging ahead with pricing aggressive interest rate rises, in most
cases betting that policy will be tightened far sooner and at a much
faster pace than rate-setters are signaling.
Reduced central bank stimulus and interest rate hikes tend to push
government bond yields up, translating into a higher opportunity cost
for holding gold that pays no interest.
Technical analysis
From current levels, the overnight swing highs, around the
$1,769-70 region, might continue to act as immediate strong resistance.
Some follow-through buying has the potential to lift gold back closer to
the $1,783-84 horizontal barrier. A sustained strength
beyond should allow bulls to aim back to reclaim the $1,800
round-figure mark.
On the flip side, the $1,750 area has emerged as immediate strong
support. A convincing break below might prompt aggressive technical
selling and accelerate the slide towards September monthly swing lows,
around the $1,722-21 region. Gold could eventually drop
to test the $1,700-mark en-route August monthly swing lows, around the
$1,687 region.
