Gold retreats after strong CPI

Fundamentals

The drop in gold prices can be attributed to the strengthening of the US dollar against most major currencies and commodities. This strengthening followed the release of inflation data by the US Bureau of Economic Analysis, which showed a year-on-year inflation rate of 3.7%, up from the previous reading of 3.2%. Additionally, the monthly inflation rate for August was 0.6%, compared to 0.2% in July.

The core inflation index, which excludes food and energy, has slowed down on a yearly basis, settling at 4.3% compared to the previous reading of 4.7%.

The data comes in just before the Federal Reserve's upcoming monetary policy meeting. It is likely that the lower core inflation rate will encourage officials to keep interest rates unchanged while discussing the possibility of a rate hike in the November or December meetings later this year.

US President Joe Biden commented on these data, stating that inflation in the United States is returning to pre-pandemic levels.

Additionally, the markets are eagerly awaiting the release of several important economic indicators in the United States, including the Producer Price Index, Retail Sales, and US jobless claims.

Gold prices were last seen near $1908 per ounce.

Critical technical levels that could impact the movement of gold

Gold is currently moving within a descending channel and has retreated, breaking the support level of $1915.00. This has led to a further decline, reaching the $1905.00 level. If this level is breached, the decline may continue, testing the stronger support level at around $1885.00.

However, if gold manages to rise above the $1915.00 level, it could contribute to further upward movement, potentially testing the $1930.00 level.