Spot gold slides away from $1,900 handle as U.S. inflation report awaits

June 10, 2021 - 2 weeks ago
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The precious yellow metal wavered between gains and losses on Wednesday, as market participants wait for this Thursday’s U.S. consumer price index (CPI) report from the Labor Department.

Last month, a much sharper-than-expected rise in April prices temporarily shook-up markets after inking in a climb of 4.2% from the previous year, the fastest increase since 2008.

A sharp acceleration of inflation in May could fuel elevated uncertainty and volatility as investors would interpret that as potentially prompting the central bank to step in and rein in its accommodative policies.

The May consensus forecast for the U.S. core consumer price index (CPI) report, which excludes food and energy, is expected to show up to 4.7% year over year.

So far, the U.S. Federal Reserve has indicated that it will not tighten monetary policy until there is substantial further progress on the recovery.

However, if prices continue to rise, it could cause the U.S. Federal Reserve to step back from its easy policies.

Market participants are now awaiting the U.S. Federal Reserve’s meeting scheduled for June 15-16.

The statement will be closely scrutinised to see whether the Fed begins to believe that inflation is higher than expected or that the economy is strengthening enough to progress without much monetary support.

With a potential bull-trap above $1,900, could once again see another choppy ahead.

For any chart arrangement, traders should be familiar with bull trap chart patterns (opposite of bear traps), as they are quite common in all markets.

A bull trap chart is a bearish signal that forms in an uptrend.

The most common place for a bull trap to happen is in a major resistance level/zone.

It does not have to be an all-time high.

Instead, it is viewed in a situation when traders enter a long position near the top of an upcycle (trend), the market may unexpectedly reverse.

Regarding the technical assessment, unless we witness a close above $1,912, overall, the view holds to $1,855.

Above $1,912 gives a neutral perspective.

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