Gold prices rose limited tonight. Further strengthening is likely to depend on the release of US inflation due to its relation to the Fed's policy outlook.
Gold prices rose within a limited range in Tuesday's trading session (07/December). Spot gold prices rose 0.2% to $ 1782.30 per ounce, in line with the price of gold futures on the Comex in New York which rose by the same percentage to 1784.60. Meanwhile, the XAU/USD chart below shows a 0.4% gain from the daily Open level to $1785.44.
Gold bulls only hope for a slowdown in Fed's monetary tightening
The US CPI index which is scheduled for release on Friday is considered to be a crucial clue to anticipate the pace of tightening of the Fed's monetary policy. The lower than expected US CPI data is expected to reduce the focus on the Fed's interest rate hikes, so that gold can find a gap to increase.
"When central banks start to restrain tightening and rule out (rise) inflation, then that's when we will see gold prices rise. So fears of slowing (monetary tightening) amid high inflation are the only bullish support for gold at the moment, " commented Craig Erlam of OANDA.
"We're still seeing a very low, volatile and choppy move in gold trading. Maybe even more consolidative for now. The main focus will be on the Fed meeting next week for clarity on interest rates, amid the current uncertainty, regarding the Omicron issue," Erlam continued.
Gold prices remained strong tonight despite the fear of the danger of Omicron infection subsided. The exact cause of the gains is unknown, but analysts expect gold's gains to be limited in the short term.
"With the market mood already more positive, gold prices are likely to remain quite weak at the moment... Unless there is a significant deterioration in risk appetite. We don't expect gold prices to go far beyond $1820 in the near term," commented Michael Hewson at CMC Markets in the UK.
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