According to the U.S. CPI data released on January 12, the CPI in December increased by 6.5% year-on-year, hitting a new low in more than a year. Reducing inflation has also established expectations that the Fed will slow down the pace of rate hikes. Before the release of the past two U.S. CPI data, the market expected that U.S. inflation growth would slow down, and the data showed that inflation slowed faster than market expectations. Some economists believe that the decline in inflation expectations gives the Fed room to continue to slow down its aggressive monetary policy.  

In addition, a research report pointed out that the World Bank had lowered the growth forecasts of many countries to levels close to the recession. The reason is that there are impacts of the Central Bank's interest rate hike, the ongoing war between Russia and Ukraine, and the slowdown of the world's major economies. With expectations of a global recession rising and Central Banks slowing down the pace of rate hikes and even possibly cutting them. As a result, investors are still looking for direction from the Fed's future interest rate hike path, giving gold prices a chance to rise.  

Technically, the target of USD1,870 mentioned last month has been reached, and then the increase has expanded, reaching as high as more than 1,900. I believe that there will be more opportunities to challenge the previous peak in the future. As of January 18, spot gold fell for the second consecutive trading day, shown in the daily chart, 1,915 - 1,920 is a larger resistance above. After such an increase in the past few weeks, it is necessary to be cautious about the risk of profit-taking adjustments. I believe there is a chance to fall back to the support level below 1,820 - 1,850. However, considering the rise in recent weeks, the overall rise in gold prices has not changed.  

At present, it is at the resistance level, so there will not be any long operations at present. On the contrary, short-term investors can try to short gold when there is a downward signal around USD1,915, and the target is around USD1,820, which is also the support of the golden ratio of 0.618, you can try to capture the opportunity to exchange for a volatility of nearly USD100. Of course, this is only a short-term view. In the long run, gold is still mainly bullish. I think gold this year is a bullish year for long-term investors. We can wait for a reasonable pullback of gold to levels around 1,800. The target is to look at the top of 1,900 first. The second goal is the top of USD 2,000 or above.

Hugo Leong

Gold Analyst of Hantec Group