Following the publication of the US inflation data, gold prices reach a new multi-month high. The critical US CPI data reinforces wagers on more gradual Fed rate increases and strengthens the XAU/USD. Bulls may be discouraged from making new wagers and capping gains for the metal due to the risk-on drive.
Following the publication of the US consumer inflation data, the gold price reversed an early North American session decline to the $1,873 region and surged to a new eight-month high. The XAU/USD is now trading below the $1,900 level, up more than 1.0% daily, and will continue to rise.
The US Consumer Price Index (CPI) figures caused the US Dollar to rebound from a seven-month low, weighing down the price of gold denominated in the US dollar. In contrast to expectations for a flat reading, the headline US CPI decreased by 0.1% in December, according to the US Bureau of Labor Statistics. However, the annual rate was in line with predictions and slowed from 7.1% in November to 6.3%. Additionally, core inflation, which excludes prices for food and energy, increased by 0.3% in December and decreased from 6.0% in November to 5.7% annually.
The mixed data, on the other hand, maintains the low rates on US Treasury bonds and confirms market expectations for a less aggressive Federal Reserve (Fed) policy tightening. In reality, increased expectations for fewer Fed rate rises going further have caused the yield on the benchmark 10-year US Treasury note to stagnate close to a multi-week low. This, in turn, stops the attempted USD rebound and gives the price of non-yielding gold a new boost. However, the safe-haven XAU/USD may only see gains limited by an upbeat atmosphere in the equities markets.
The underlying environment is still solidly in favor of optimistic traders, however. The advent of dip-buying in the most recent hour supports the optimistic picture. As a result, there is a chance that the price of gold will continue to rise shortly. However, it would be wise to hold off on new positive wagers until gold prices continue to rise steadily past $1,900.
