Gold prices are currently under pressure as a “risk-on” market sentiment reduces demand for safe-haven assets like gold. Expectations for a slower pace of Federal Reserve rate cuts have driven flows away from the precious metal, while softer-than-expected US Producer Price Index (PPI) data adds further uncertainty. Traders are on the sidelines ahead of the US Consumer Price Index report, which could dramatically alter the market’s perception of Fed policy going forward. A better-than-expected CPI might put a damper on gold’s rally, while weaker-than-expected data might add more fuel to the fire in terms of gold prices. From a technical perspective, gold is still in a consolidation pattern, with major resistance levels at $2,675 and $2,700, and significant support at $2,640 and $2,615. The near-term direction of gold may be dictated by the outcome of the CPI report.

KEY LOOKOUTS

• The CPI report will drive Fed rate cut expectations and the direction of gold.

• A breakout above $2,675 may lead to further upside toward $2,726.

• Support zones at $2,640 and $2,615 may prevent a deeper downside.

• A risk-on sentiment may cap demand for gold and limit upside momentum.

Gold prices closely correlate with market events that will be taking place soon, the US CPI report being one of the most crucial factors in expectations of future Fed rate cuts. If the data for the CPI comes in better than expected, it may affect the bullish sentiment in gold; on the contrary, weaker data may support additional price gains. Key technical levels are also focused on, and resistance is near $2,675 and $2,700, while support lies around $2,640 and $2,615. Moreover, the general market’s risk appetite will play a role in the next direction, as the risk-on environment might suppress demand for gold and cap its rally. The factors above need to be closely monitored by traders in the near future.

The next US CPI report will be decisive for the outlook of gold’s price, where resistance will be found at $2,675 and support at $2,640. Market sentiment and expectations for Fed rate cuts will also guide gold’s direction.

KEY POINTS

• The US CPI report due soon will impact market expectations of Fed rate cuts, which will heavily influence the short-term price trajectory of gold.
• Gold is finding strong resistance at $2,675 and $2,700. A breakout above these levels may push the bull further toward $2,726.
• Key support zones around $2,640 and $2,615 will be crucial in determining if gold can hold its ground or faces further downside.
• Market participants have adjusted their expectations to just one Fed rate cut in 2025, influencing gold’s appeal as a safe-haven asset.
• A prevailing risk-on sentiment could reduce demand for safe-haven assets like gold, limiting its potential for further upside.
• Ongoing geopolitical tensions or economic uncertainty could provide support for gold, maintaining its role as a hedge against instability.
• With RSI over 50 and a recent symmetrical triangle breakout, gold remains in a bullish consolidation phase that bodes well for future price moves.

Gold has been under pressure due to changing market sentiment from risk-off to risk-on. As a result, the safe haven demand of the yellow metal is being dampened. Market participants are waiting for the US Consumer Price Index (CPI) that could have a big impact on the expectations for further Federal Reserve rate cuts. If CPI is stronger than expected, this may make the Fed sound a bit hawkish, which will send gold down. If it is weaker than expected, this will be helpful for gold in its bullishness. Technically, gold faces strong resistance around $2,675 and $2,700. If the price breaks through these barriers, it is most likely to target the December high of $2,726. On the flip side, significant support zones are present around $2,640 and $2,615. In case gold comes under downward pressure, these levels may serve as a floor.

Deeper technical factors aside, more significant factors are at play here as well. Market expectations have been adjusted to only one Fed rate cut in 2025, which in turn is limiting the appeal of gold as an alternative asset. A prevailing risk-on sentiment where investors are preferring riskier assets could limit gold’s upside. Geopolitical risks and economic uncertainties may however provide some support for gold as a safe-haven investment. The Relative Strength Index (RSI) is still above the midline, hence remaining in a bullish consolidation phase. Furthermore, gold continues being a “buy-the-dips” trade.

TECHNICAL ANALYSIS

Gold is consolidating in a bullish phase after the breakout from the symmetrical triangle pattern, and the RSI of 14 days continues to print above the midline around 56. The market exhibits the sentiment of “buy the dips.” It still has key resistance at $2,675 and $2,700. Any sustained break above these could signal further upside toward the December 12 high of $2,726. On the negative side, strong support is found at $2,640, a critical zone marked by multiple moving averages and the triangle convergence. A drop below this level could lead to further declines, with $2,615 acting as the next key support area. The technical indicators suggest that gold could continue to consolidate or push higher, depending on how these key levels hold.

XAUUSD Daily Price CHART

Sources: TradingView, Prepared by ELLYANA

FORECAST

Short-term gold price forecasts are highly dependent on key technical levels and some upcoming economic data, most importantly the US CPI report. If gold can break and hold above the $2,675-$2,700 resistance zone, we may expect further upside momentum towards the December high of $2,726. A sustained break above $2,700 could open the door for a bullish run and potentially target higher levels.

However, if gold breaks down, not above the resistance barrier, but is subjected to selling pressures, it will be tested to the strong support zones around $2,640 and $2,615. Below that, at $2,640, a deeper correction seems highly likely, with $2,615 being the next serious level of support. Overall market sentiment, from the risk-on mood to the Federal Reserve’s stance, will also play a large role in setting the direction for gold. If inflation data is weaker than expected, this could help push gold higher. Stronger data might send it lower.