Investors focused on U.S. inflation data, which could shed more light on the Federal Reserve’s policy tightening timeline. Hence, on Tuesday, gold prices remained stable in a narrow range.
By 0619 GMT, spot gold was up 0.1 % to $1,808.24 per ounce. Meanwhile, US gold futures were up 0.2 % to $1,809.10. The dollar index was largely unchanged in comparison to its rivals.
Following the release of the U.S. consumer price index (CPI) report, attention will shift to Fed Chairman Jerome Powell’s testimony before Congress on for his reaction to the inflation data. While gold has viewed as an inflation hedge, rising interest rates will reduce its appeal by increasing the opportunity cost of holding the non-yielding precious metal.
The CPI Data
According to IG Market analyst Kyle Rodda, the CPI data will shape the market’s perception of Powell’s testimony. He believes the Fed is edging closer to that desire to warm the market up to policy normalization. If they continue or accelerate along that path, that will be a headwind for gold.
Gold prices had stabilized after experiencing their most significant monthly drop since November 2016 in June. Powell stated that the Fed would not raise interest rates too quickly. He based this solely on the fear of future inflation and would instead aim for a broad job market recovery.
Last week’s drop in benchmark 10-year Treasury yields to their lowest level in nearly five months also aided gold. Unless there is unexpected news, I expect gold to consolidate and trade in a range of $1,800/oz to $1,820/oz over the next week, said Michael Langford, director at corporate advisory AirGuide.
Silver is still stuck in a tight range between $25.80 and $26.30, while the U.S. dollar is strengthening against a broad basket of currencies.
The gold/silver ratio is currently testing 69. If the gold/silver ratio falls below this level, it will move towards the 68.70 support level, bullish for silver.
Silver has recently attempted to break through the resistance at $26.30 and has moved closer to the nearest support level at $25.80. If silver falls below this crucial support level, it will head towards the $25.50 support level. The RSI is in the moderate range, and there is plenty of room for further downside momentum.
Gain upside momentum in the near term; silver must settle above the resistance at the 20 EMA at $26.30. Suppose silver manages to break through the resistance at the 20 EMA. In that case, it will proceed to the next resistance level at the 50 EMA, which is $26.60. A move above the 50-day moving average (EMA) will push silver towards the $27.00 resistance level.