Gold Carves Out Doji with US CPI Print in Focus

Talking Points: 

• Gold has had a bumper start to 2023, surging higher on dovish Fed expectations.  

• A softer-than-expected CPI print could accelerate the move higher.  

Gold has started off a fresh new year of trade on the front foot, storming back towards the $1,900/oz mark as investors bet on a dovish pivot from the Federal Reserve later this year in response to a possible recession in the US. Last week’s jobs reports helped to buoy the precious metal even further, with softening wage growth providing further support to the argument that the Fed will not have to keep rates elevated for as long as originally intended and may have to swiftly reverse course in the second half of this year. Indeed, markets are pricing in at least 50-basis points of interest rate cuts by the end of 2023, with an additional 150-basis points priced in for next year. This dovish pricing, in tandem with a series of positive inflation prints and a ‘Goldilocks’ job report, has coincided with a peak in US real yields and opened the door for anti-fiat gold to head north.  

US 10-Year Real Yields Inverse Relationship with Gold Price 

US real rates of return and gold historically exhibit a strong inverse relationship. Attention now turns to December’s inflation report scheduled for release later today. Core inflation is currently running at 6% and is expected to decline to 5.7%, while headline consumer price growth is tracking at 7.1% and is tipped to have slowed for the sixth consecutive month to 6.5%. A softer-than-expected core and headline print would likely prove bullish for gold and lead to further dovish pricing of Fed Funds futures. On the other hand, an upside surprise could trigger a swift repricing of Fed policy expectations and trigger a sharp sell-off for gold.  

Gold Price Daily Chart – Doji Signals Indecision Ahead of Key Print 

From a technical perspective, gold is approaching a key juncture as price begins to challenge key psychological resistance at 1,880.  

The formation of a Doji candle just shy of key resistance suggests that a downside reversal could be in the offing, especially when combined with price carving out what appears to be a bearish Rising Wedge pattern.  

Nevertheless, if price remains constructively positioned above the pivot point at 1,850 it’s hard to envision a sharp sell-off back towards 1,800. 

Ultimately, a daily close above range resistance at 1,888 is needed to validate bullish potential and bring the 1,900 mark into focus.  

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