Gold outlook: CPI in focus as investors keep eye on yields
Gold was up for the second day ahead of US inflation data, threatening to break higher. However, bond yields are unlikely to fall back significantly in the near-term, even if we see a small miss in US inflation data today. This should keep the upside limited for gold. Therefore, we are still quite cautious when it comes to near-term gold outlook, even if we ultimately expect to see gold rising to $3,000 later this year.
Gold outlook: all about bond markets
It is the bond markets where investors’ attention remains firmly fixated on, not just those involved in gold but for equity and FX traders too. Bond yields have been surging higher in recent days across the world, all due to rising expectations that interest rate are likely to remain tight for longer, mainly in the US, but European rate expectations have also been repriced higher somewhat - most notably in the UK. In Japan, investors are growing confident that the Bank of Japan is going to start lifting rates further from their ultra-low levels and bring monetary policy a little closer to the rest of the world.
In the last couple of days, though, we have seen a bit of a pullback in those expectations thanks to release of weaker-than-expected US PPI on Tuesday and UK CPI earlier today. This has allowed gold to rise a little in the last couple of days.
The focus is now turning to the US CPI report. A weaker set of inflation data could cause the metal to further strength while hotter data should be bad news for all low-yielding currencies and zero-yielding assets alike.
Today’s CPI report will come hot on the heels of the much stronger December jobs report than was expected on Friday, and the recent upsurge in oil prices – all helping to fuel expectations that inflation is going to remain sticky.
Beyond data and oil prices, it is Trump’s threat of tariffs that is the main driver behind rising inflationary expectations. So far, his rhetoric has not softened, through reports suggest he may apply tariffs more gradually to help limit inflation.
Therefore, if we are to see bond yields and the US dollar reverse more meaningfully, expectations about Federal Reserve rate cuts will have to be brought significantly forward from currently pricing of October for the first cut.
In the coming months, this will mostly depend on how the new US government will proceed with its policy of tariffs and how that might impact inflation, plus the impact of oil prices. In the short term, only the trend of incoming data will be able to impact those expectations. The impact of individual data releases will therefore be limited - as we will likely find out with the CPI release later on.
Anyway, CPI inflation is seen rising to 2.9% y/y from 2.7% the previous month, while core CPI is expected to remain unchanged at 3.3%. On a month-on-month basis, they are seen printing 0.4% and 0.3%, respectively.
Technical gold outlook: key levels to watch
Source: TradingView.com
Gold was again trying to break above the resistance trend of its recent consolidation pattern to the upside, ahead of the inflation data. Earlier this week, it found support at $2660, and managed to hold above the 6-month-old bullish trend line once again. The trend line comes in around the $2640-50 area. We will turn tactically bearish on the gold price outlook should this trend line break down. Unless that happens, our gold outlook is neutral at current levels. The next level of resistance comes in around $2695, followed by $2710.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
How to trade with City Index
You can trade with City Index by following these four easy steps:
-
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2025