When is the US consumer inflation (CPI report) and how could it affect gold?

US CPI Overview

Thursday's US economic docket highlights the release of the critical US consumer inflation figures for February, scheduled later during the early North American session at 13:30 GMT. The headline CPI is anticipated to come in at 0.8% during the reported month, up from 0.6% in January. The yearly rate is also projected to hit a new 40-year high and accelerate to 7.9% in February from 7.5% in the previous month. Meanwhile, core inflation, which excludes food and energy prices, is anticipated to rise to 6.4% from a year ago as against 6.0% in January.

According to analysts at TD Securities: “Core prices likely eased on an MoM basis (0.5%), but the pace is expected to have stayed fairly strong. While inflation in used vehicles likely slowed, it was probably offset by continued strength in shelter prices. An expected 7% MoM surge in gasoline prices also likely added to headline pressures (0.7%). Our MoM forecasts imply 7.8%/6.4% YoY for total/core prices, up from 7.5%/6.0% in Jan.”

How Could it Affect Gold?

Ahead of the key release, gold attracted fresh buying near the $1,970 region on Thursday and stalled the overnight sharp pullback from the vicinity of the August 2020 peak. The optimism over a possible diplomatic solution to the Russia-Ukraine conflict faded after negotiations between the foreign ministers of the two nations broke down without any notable progress. This, in turn, triggered a fresh wave of the global risk aversion trade and benefitted the safe-haven precious metal.

A hotter-than-expected US CPI report could lend additional support to gold, which has a proven historical ability to act as a hedge against inflation. Conversely, a softer reading is likely to be overshadowed by the worsening situation in Ukraine and continue acting as a tailwind for the XAU/USD. This, in turn, suggests that the path of least resistance is to the upside, though the emergence of fresh US dollar buying could act as a headwind for the dollar-denominated commodity.

Dhwani Mehta, Senior Analyst and Editor at FXStreet, offered a brief technical outlook for the metal: “On the four-hour chart, gold price is attempting a tepid bounce, although, with the Relative Strength Index (RSI) still below the midline, the corrective downside remains intact. There remains some room for sellers to test the critical support at $1,960, which is the confluence of the ascending 50-Simple Moving Average (SMA) and rising trendline support.”

Dhwani also outlined important technical levels to trade the XAU/USD: “Four-hourly candlestick closing below the latter will initiate a fresh downswing towards the bullish 100-SMA at $1,930. Further south, the $1,900 round level will come to the rescue of gold bulls.”

“On the flip side, if the upside resumes traction, then the immediate hurdle is seen at the $2,000 psychological mark. The next bullish target is envisioned at the horizontal 21-SMA at $2,006, above which bulls could attempt a fresh run-up towards $2,050. The record highs of $2,075 still remain a tough nut to crack for XAU buyers,” she added further.

Key Notes

  •   US February CPI: Will the Ukraine war sideline central banks?

  •   US CPI Preview: Forecasts from 9 major banks, inflation to go higher to new multi-decade highs

  •   Gold Price Forecast: Is the XAU/USD correction over yet? Focus on US inflation, peace talks

About the US CPI

The Consumer Price Index released by the US Bureau of Labor Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).