Gold Tests $5,200 Before US CPI
Gold prices struggled to maintain momentum above the $5,000 level early Wednesday, even as oil prices declined. The US Dollar weakened again as risk sentiment improved, while market participants shifted their focus to the upcoming US Consumer Price Index (CPI) data.
Technically, gold closed Tuesday above the 61.8% Fibonacci level at $5,141, raising the possibility of further upside. Meanwhile, the Relative Strength Index (RSI) remains near 57, comfortably above the neutral 50 level. This suggests bullish momentum is still intact despite the recent pullback from late-May highs.
If the monthly and annual US core CPI figures come in stronger than expected, it could reduce the chances of Federal Reserve rate cuts this year. Such a scenario may revive the US Dollar’s upward trend and pressure gold prices lower. In that case, gold could retest the $5,000 support zone, with a potential decline toward the 50-day Simple Moving Average (SMA) near $4,915.
On the other hand, gold may extend its recovery if inflation slows faster than forecast. This would increase expectations of rate cuts and weaken the US Dollar. Under this scenario, gold could climb toward the 78.6% Fibonacci resistance at $5,342, provided the key psychological barrier at $5,250 is decisively broken.
Despite rising geopolitical tensions in the Middle East, gold has struggled to fully shine as a traditional safe-haven asset and inflation hedge.
However, renewed selling pressure in oil prices—following a Reuters report that the International Energy Agency (IEA) proposed the largest oil reserve release in history to curb crude prices—has boosted market risk appetite. This development reduced the safe-haven demand for the US Dollar, indirectly supporting gold’s rebound from near the $5,000 level.
Markets are now eagerly awaiting the February US CPI inflation report to assess whether Federal Reserve rate cuts remain possible later this year. The inflation data could act as a key catalyst for gold buyers aiming to restore the metal’s bullish trend.
Economists expect annual US core CPI to remain steady at 2.5% in February, while monthly core CPI is projected to rise 0.2%, slightly slower than January’s 0.3% increase. Meanwhile, headline annual CPI is expected to stay around 2.4% during the same period.
Even so, the market reaction to US inflation data may prove temporary, as escalating tensions in the Middle East and volatile oil prices could continue to dominate investor sentiment in the near term.