Gold price dodges CPI shock as US yields hand bulls lifeline

Gold prices remained relatively stable, avoiding a significant impact from the US Consumer Price Index (CPI) data release on Friday. The metal reclaimed its 100-day Simple Moving Average (SMA) of $4,335 after the inflation figures, which indicated a 0.4% monthly increase and a 3.4% annual rise, both in line with expectations. Although core CPI rose slightly above forecast at 0.3%, over the past year, it remained steady at 2.4%, slightly down from July's reading and matching estimates.

The US Dollar Index (DXY) held steady at 99.00, as traders anticipated a high probability of a Federal Reserve (Fed) rate hike during the upcoming meeting, according to Prime Terminal data. The University of Michigan Consumer Sentiment for September also fell short of forecasts, falling from 51.7 to 47.8. However, Americans expect inflation to climb from 4% to 4.6% over the next year, and from 3.3% to 3.4% over five years.

Despite the recent inflation data, gold prices persisted, buoyed by falling US bond yields throughout the session. The US 10-year Treasury yield dropped 1 basis point to 4.951%, while over the week, it climbed over 16.5 basis points or 3.49%. Analysts expect gold's future performance to hinge on the Fed's monetary policy decision next week and Fed Chair Kevin Warsh's press conference. The RSI showed upward potential but remained below its neutral level, indicating potential selling pressure around the $4,400 mark.

On the upside, the first key resistance level is $4,400, followed by psychological levels at $4,450 and $4,500, with the 200-day SMA at $4,538 as a potential next target. On the downside, gold must break below the 100-day SMA at $4,335 and the $4,300 level to reach September's low of $4,282 and the 50-day SMA at $4,269. Throughout history, gold has been utilized as a store of value, medium of exchange, and hedge against inflation and depreciating currencies.

Central banks have been significant holders, adding 1,136 tonnes worth $70 billion to their reserves in 2022, the highest yearly purchase since records began.