Gold Gains Support Near $1,780 – Time to Buy?

During early Tuesday morning in Europe, the gold price fell from an intraday high as bulls battled with the important support-turned-resistance level of $1,800. As a result, the yellow metal applauds the broad decline in the US Dollar ahead of the November Consumer Price Index (CPI). The market’s cautious confidence about China and lower US Treasury yields could also boost the XAU/USD quote.

Nonetheless, the US Dollar Index (DXY) remains lethargic, hovering around 105.00 after increasing for two days. The recent immobility of the US dollar could be attributed to confusing signals around imminent US inflation data and mixed international events. 

The New York Fed’s short-term inflation forecast contrasts with the St. Louis Federal Reserve’s (FRED) data, which shows positive inflation forecasts for the next five and ten years. Nonetheless, the most recent 5-year and 10-year inflation expectations show a comeback to 2.28% and 2.35%, respectively.

Similarly, last week’s disappointing US Producer Price Index (PPI) figures suggested weaker US inflation. Nonetheless, the University of Michigan’s (UoM) Consumer Sentiment Index, the US ISM Services PMI, and inflation forecasts from the UoM Survey all pointed to firmer US CPI readings.

Gold bulls benefit from confidence around China’s gradual elimination of the “Zero-Covid” policy. Nonetheless, the government of Shanghai city said on Monday that all neighborhoods would be deemed “not at risk of COVID” as of Tuesday, December 13, according to Reuters. Earlier this week, Chinese officials said that the application used to track coronavirus infections would be taken offline later this week.

Looking ahead, gold traders will be watching US inflation data. Market expectations for the headline CPI for November indicate a lower print of 7.3% YoY versus 7.7% previously, while the monthly CPI may fall to 0.3% versus 0.4% previously. The CPI excluding food and energy appears to be the important figure and is likely to remain steady at 0.3% MoM, which will satisfy DXY buyers but weigh on XAU/USD prices if the print is stronger.

Gold Technical Outlook

The XAU/USD has gained support at the $1,780 level, and the closing of candles above this level has the potential to lead the gold price toward $1,805. On the upside, gold’s immediate resistance stays at $1,805; above this, it can go after the next resistance level of $1,805.

Alternatively, a bearish breakout of $1,781 can extend the selling trend until $1,766. Good luck!