Gold Prices Break Neckline: U.S. Inflation on Deck

London (Feb 10)  Gold prices are fell for the second consecutive week with the precious metal off by more than 1.5% to trade at 1312 ahead of the New York close on Friday. The losses come amid a tumultuous week in equity markets with all three major US stock indices trading lower by nearly 8%. The total declines off the January record highs takes us into correction territory with the indices now trading lower year-to-date. For gold, the panic offered little support with bullion continuing to target the 2018 open just lower. 

Headlines continue to be dominated by speculation that last Friday’s strong Non-Farm Payrolls figures (specifically wage growth) have spooked market participants over fears of rising inflation which could stoke the Federal Reserve to tighten at a faster pace. Gold is caught in a tug-of-war from a fundamental standpoint. An increase in inflation expectations would typically be supportive but the focus on how this may impact the path for monetary policy continues to outweigh sentiment. 

Continued strength in the U.S. Dollar has also weighed on Gold prices with the DXY building on last week’s reversal with a 1.6% rally. Next week traders will be closely eyeing more inflation data with the release of the January U.S. Consumer Price Index (CPI) and Retail Sales on tap for Wednesday. From a technical standpoint, there’s a little more room for further losses near-term, but we’re generally on the lookout for a near-term low heading deeper into February trade.

FXdaily