Technical Outlook for Gold Prices Ahead of US Inflation Data Release

-How will inflation data impact gold price movements as per analysts? 
- A technical outlook for gold prices before the US inflation data release 

How can inflation data impact gold price movements as per analysts?

All eyes are on gold prices during today's trading, as significant volatility is expected due to the release of US inflation data. This is largely driven by the negative correlation typically observed between the US dollar and gold. However, it is important to note that this relationship is not always consistent. At times, both gold and the US dollar can move in tandem, as both serve as safe-haven assets for investors. 

Markets anticipate an increase in annual US inflation from 2.7% to 2.9%. If realized, this would be the highest reading in four months. On the other hand, core consumer price index (CPI) inflation is expected to remain steady at 3.3% year-over-year for the fourth consecutive month. 

If the inflation data comes in stronger than expected, the US dollar will likely strengthen, negatively impacting gold prices in the short term. Additionally, markets may expect the Federal Reserve to refrain from cutting interest rates anytime soon, which would further support the dollar. 

Technical Outlook for Gold Prices Ahead of US Inflation Data 

Gold is currently trading in a downtrend on the 4-hour timeframe, forming a lower low at 2662.645 and signaling a shift from an uptrend to a downtrend. The recent rise in price appears to be a corrective movement, with 2689.290 acting as a key reversal point. This suggests the potential continuation of the downtrend toward the 2666.668 level. 

Two key factors could counter this bearish scenario. First, weaker-than-expected US inflation data could provide positive momentum for gold prices. Second, a technical breakout may occur if gold’s 4-hour candlestick closes above 2697.825, analysts suggest. 

Figure 1: XAUUSD, H4, TradingView