XAU / USD continues to trade sideways in the $ 1,820 zone

• Gold continues to trade practically lateralized on the day at the $ 1,820 zone after a higher than expected US CPI.
• In an unintuitive reaction, the dollar has weakened in recent trading, but technical resistance is preventing gold from profiting.

Following a higher than expected US consumer price inflation (CPI) report, gold prices (XAU / USD) They continue to trade lateralized at $ 1,820, where they are trading practically unchanged on the day. In a somewhat unintuitive reaction to the rise in the headline CPI in line with expectations to 7.0% year-on-year, its highest levels since June 1982, and the rise in the underlying CPI above expectations to 5.5%, the US dollar has been under pressure. The data, coming on the heels of last Friday’s employment report that showed the unemployment rate fell below 4.0%, strongly supports the case that the Fed will tighten this year, even if much of the recent pressure comes from used car prices.

But market participants seem to be considering that the positioning in the US dollar has become too bullish in recent weeks, hence the fall of both. For reference, the DXY recently fell below 95.50 to hit its lowest level since mid-November. The case of the dollar is not helped by the fact that, as a result of the data, the 10-year TIPS yields are lateralized around -0.85%, having fallen by about 10 bp since Fed Chairman Jerome Powell, is not as aggressive as for example in the comments on Tuesday. The combination of a weak dollar plus moderate real returns would normally be positive for gold prices.

However, resistance in the form of a downtrend from the January 2-5 highs appears to have prevented the XAU / USD from rising. Perhaps if the dollar continues to decline and real returns continue to decline, then gold may see a breakout to the upside and test last week’s highs in the $ 1,830 zone. It is worth noting that many rate and currency strategists think that, in the medium and long term, as the Fed tightens monetary policy, the path of the dollar and US real yields will eventually be higher. That suggests that traders should guard against building medium-term bullish positions for gold and instead need to be nimble if they are going to trade on the long side.

XAU/USD