Gold prices traded cautiously above $2,900 early Wednesday as investors awaited the release of the US Consumer Price Index (CPI) data, while also considering the impact of global tariff tensions.
Market Cautious Ahead of US CPI Release
A sense of caution permeates the market as traders await the US inflation figures, leaving gold to fluctuate within a narrow range. The US Dollar (USD) experienced a short-covering rebound, as traders took profits following its recent decline.
The resurgence of the USD and rising US Treasury bond yields have temporarily dampened gold’s recovery. However, if the US annual headline and core CPI figures come in lower than expected, it could trigger a return of bullish sentiment for gold. A softer CPI might prompt the Federal Reserve (Fed) to reconsider its interest rate policy, potentially leading to rate cuts this year. This would likely weaken the dollar and Treasury yields, providing support for gold, which benefits from its status as a non-interest-bearing asset.
On the other hand, if the CPI data exceeds expectations, gold could reverse its recent gains. Strong inflation figures would reinforce the Fed’s cautious stance on inflation, potentially limiting the likelihood of rate cuts, which would be a negative catalyst for the yellow metal.
Global Tariff Tensions Weigh on Market Sentiment
Meanwhile, global trade tensions continue to play a significant role in market dynamics. The Trump administration’s ongoing tariff disputes remain in focus, with the White House confirming that a 25% tariff on all steel and aluminum imports to the US would take effect Wednesday. US Trade Secretary Peter Navarro also mentioned that the US would initiate reciprocity measures starting April 2.
In response, Canada’s Energy Minister, Jonathan Wilkinson, warned that Canada could impose non-tariff measures, including restrictions on oil exports to the US, should trade tensions with Washington escalate further.
Markets are also keenly watching US-Russia peace talks regarding the ongoing Ukraine conflict. Ukrainian President Volodymyr Zelensky agreed to a 30-day ceasefire proposal, pending Russia’s acceptance, as reported by CNN.
The combination of trade wars and geopolitical risks is keeping market sentiment volatile, with any impact on gold prices from US inflation data potentially being short-lived.
Gold Price Technical Analysis: A Look at the Daily Chart
Technically, gold has managed to close above the 21-day Simple Moving Average (SMA) at $2,910, offering a glimmer of hope for further upside momentum. The 14-day Relative Strength Index (RSI) remains solidly above the 50 mark, supporting the case for a bullish outlook.
Should gold sustain its position above the 21-day SMA following the release of the US inflation data, the next key resistance level will be the February 26 high of $2,930. Further gains could push gold towards its all-time high of $2,956, with a potential target of the $2,970 level.
In the event of a negative CPI surprise, immediate support is seen at Tuesday’s low of $2,880. A failure to hold above this level could lead to a test of the psychological support level at $2,850. Additional declines may target the static support area at $2,835.
Conclusion
As investors await the US CPI data and continue to monitor global trade tensions, gold prices remain in a precarious position. A soft inflation reading could boost gold’s appeal, while stronger-than-expected data could dampen the rally. The geopolitical landscape, including ongoing tariff disputes and peace talks, adds to the uncertainty, ensuring that gold remains sensitive to both economic and political developments.