Gold Price Forecast: Traders await US CPI with the Fed eyed

• Gold remains in familiar ranges in the countdown to the Fed.
• US CPI is the next potential catalyst for gold. 

Gold, XAU/USD, has been pressured on Thursday as the greenback corrects the prior day's slump ahead of the US Consumer Price Index data on Friday. The yellow metal is down some 0.4% at the time of writing after travelling from a high of $1,787 and reaching a low of $1,773.31 so far. 

The greenback, as measured vs. six major currency rivals in the DXY index, is up by 0.3% at the time of writing. The index finding support near 96 the figure as investors position for a stronger inflation outlook into next week's Federal Reserve meeting.  

Analysts at TD Securities explained that they expect inflation to slow significantly as fiscal stimulus fades and supply constraints ease, but we don't expect the data to be validated in the near term. ''The CPI likely surged in Nov, with a drop in oil coming too late to avert another large gain in gasoline and core prices boosted by rapidly rising used vehicle prices and post-Delta strengthening in airfares and lodging.''

Fed in focus

The Fed next week is expected to open the gates to a second-quarter rate rise if needed. The tightness in the labour market is becoming more evident and that was seen in the Initial Claims for the latest week.

The data climbed just 184k, the lowest increase since 6 September 1969, signalling labour hoarding amid strong demand for labour is at play. Analysts at ANZ Bank explained. ''Available slack in the labour market is low and constrained by high levels of early retirees and ongoing jobs displacement (childcare etc) from the pandemic. Wage pressure look set to intensify further.''

However, while inflation prints are expected to remain elevated into the early months of the new year, suggesting that the market's pricing for Fed hikes could still become more aggressive, analysts at TD Securities said that they ultimately expect that it will prove to be far too hawkish.

''In fact, with both an accelerated taper and more than three rate hikes already priced in for 2022, the balance of risks for gold positioning remains to the upside, as geopolitical risks and virus risk could catalyze a positioning reshuffling.''

Meanwhile, the wild card for financial markets stays with the new variant of the Covid-19 disease. Omicron is sweeping its way through the world. The epicentre is once again in Europe. However, while the increased number of people vaccinated against Covid had inspired hopes that Americans would be able to avoid a fresh wave of the illness, the rise in Covid cases; holiday gatherings; and unanswered questions about the Omicron variant have sparked fresh concerns. Nonetheless, the Fed has turned uber hawkish despite the risks which is undermining the greenback and weighing on the price of gold. 

Gold technical analysis

The yellow metal remains within a familiar territory and the monthly chart illustrates that space is running out for the bulls. A break of the symmetrical triangle opens the risk of a breakout to the downside which could be potentially significant if $1,700 gives out