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7 Feb 2022

Gold Price Analysis: XAU/USD trading with positive bias near last week’s $1815 high as US CPI data eyed

  • Spot gold has been trading with a positive bias near last week’s $1815 highs on Monday.
  • Analysts have been surprised by gold’s strong performance as of late despite rising bond yields on central bank tightening bets.
  • The main risk this week is US CPI data on Thursday.

Spot gold (XAU/USD) prices have been trading with a positive bias on Monday, with prices currently around $1813, up about 0.3% on the day, having found support after an earlier dip back towards the 200-Day Moving Average at $1808. For now, last Friday’s pre-US jobs data high around $1815 is capping the price action, but the momentum for an upside break does seem to be there. Should XAU/USD break above $1815 resistance, its clear air to the upside all the way back to the $1830 balance area, which would be the next target for the bulls.

Some analysts are surprised at how well gold has been able to hold up in recent weeks, despite rising US and global bond yields on increasingly hawkish central bank tightening bets (particularly with regards to the Fed and ECB). Case in point; despite last Thursday the ECB opening the door to 2022 rate hikes and last Friday strong US jobs report raising the risk of a 50bps first Fed hike in March, gold ended the week up nearly 1.0%.

“Gold's been a brilliant hedge this past month against falling stocks and rising bond yields so that's adding to the underlying positive case for gold right now” said analysts at Saxo Bank. “It's a combination of inflation obviously not being transitory ... (and) another issue that we cannot really ignore is the geopolitical risks that are currently in the market with regards to Russia and Ukraine,” they continue.

Looking ahead, the main challenge for gold this week, apart from a barrage of G7 central bank speakers, will be the US Consumer Price Inflation report for January. Typically, an upside surprise would be associated with lower gold prices as a more hawkish Fed policy outlook is priced in. With investors seemingly looking for inflation and equity/bond market downside protection, that might mean gold continues to outperform, even if US inflation surprises to the upside. For reference, the YoY rate of inflation is seen hitting 7.3% in January.

 

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