Gold Price Forecast XAU/USD – Bullish Inflation Expectations Data Could Trigger Intraday Rally

Gold futures are edging higher on Friday, hovering just below a nine-month high reached earlier in the session. The move is being driven by a decline in U.S. consumer prices that led to increased bets for slower Federal Reserve interest rate hikes.

At 12:00 GMT, February Comex gold is trading $1902.90, up $4.10 or +0.22%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $176.64, up $2.02 or +1.16%.

Despite hitting a new weekly high on Friday, buyer sentiment shifted when U.S. Treasury yields rebounded and the U.S. Dollar reversed higher. The move isn’t likely reflecting a shift in sentiment but rather position-squaring and profit-taking ahead of today’s U.S. University of Michigan Consumer Sentiment report at 15:00 GMT.

Gold Bulls Have Their Eyes on the $2000 Prize

The current price action suggests investors may have already set their sights on the psychological $2000 level with the $1900 level just a pit-stop. However, in order to get there quickly, traders need a catalyst. That catalyst is the Federal Reserve

If the Federal Reserve sides with the market at its Jan. 31 – Feb. 1 meeting and hints that peak U.S. rates are close at hand and that an eventual rate cut remains on the table, gold prices could explode to the upside with $2000 the next likely target.

Underpinned by Cooling Consumer Inflation

Gold prices received another boost on Thursday when U.S. consumer prices fell for the first time in more than 2-1/2 years in December as gasoline and motor vehicles prices declined, offering hope that inflation was now on a sustained downward trend, though the labor market remains tight.

Americans also got more relief at the supermarket last month, with the report from the Labor Department on Thursday showing food prices posting their smallest monthly increase since March 2021. But rents remained very high and utilities were more expensive.

The consumer price index dipped 0.1% last month, the first decline since May 2020, when the economy was reeling from the first wave of COVID-19 cases. The CPI rose 0.1% in November.

Economists polled by Reuters had forecast the CPI unchanged. It was third straight month that the CPI came in below expectations and raised buying power for consumers as well as hopes the economy could avoid a dreaded recession this year.

Excluding food, shelter and energy, prices dropped for a third consecutive month.

In the 12 months through December, the CPI increased 6.5%. That was the smallest rise since October 2021 and followed a 7.1% advance in November. The annual CPI peaked at 9.1% in June, which was the biggest increase since November 1981. Inflation remains well above the Fed’s 2% target.

Short-Term Outlook

Later today at 15:00 GMT, gold traders will get the opportunity to react to the latest report on Preliminary University of Michigan Consumer Sentiment and Preliminary University of Michigan Inflation Expectations.

Sentiment is expected to edge higher to 60.8, up from 59.7 and inflation expectations are expected to come in below the 4.4% previous reading. This could be enough to launch another intraday surge in gold prices.