Gold price forecast: U.S. CPI and interest rate expectations fuel 3-day gain
Gold rallies 2.5%, nears critical $2,700 resistance as CPI and rate cut odds boost sentiment
Gold prices have surged this week, rising over 2.5% from December 9 to December 11, a strong rally that has brought the yellow metal to a critical resistance level of $2,700 per ounce. The rally’s momentum has been palpable as it now faces key macroeconomic challenges that could shape its next move.
After a three-day winning streak, gold has managed a 2.77% gain, moving towards the November 25th high. This recent momentum is the first time since November 22 that gold has posted a sustained rally. A key factor contributing to the rally is the U.S. CPI data, which is expected to show modest inflation growth.
Year-over-year CPI is projected to come in at 2.7%, slightly higher than last month's 2.6%, while the core CPI is expected to remain unchanged at 3.3%. The flat CPI data and the growing likelihood of a 25 basis point rate cut, with probabilities rising from 64.6% on November 8 to 86.3% today, are both factors that have given a tailwind to gold. As interest rate expectations shift, investors are flocking to gold as a safe haven, pushing prices higher.
Gold price analysis: $2,700 resistance is critical for further upside gains
As seen on the 4-hour chart, technical indicators suggest caution. The Relative Strength Index (RSI) shows that the recent rally pushed gold into overbought territory, given that the RSI topped 70. As a result, in the European session on Wednesday, December 11, gold ran out of steam and briefly retraced from its high to $2,690.
Gold price dynamics (September-December 2024). Source: TradingView.
The outlook for gold largely hinges on the ability to break above the $2,700 resistance. A successful breakout could pave the way for a fourth consecutive day of gains, extending the rally further. However, if the resistance holds, the rally could lose steam, and a correction may be on the horizon.
Gold continues its upward trajectory after breaking out of a symmetrical triangle pattern and reclaiming the 200 EMA. The precious metal’s rally is fueled by heightened geopolitical tensions and renewed central bank purchases.
