Super week strikes, gold price ushers in a direction decision

On Monday (December 12), the market anxiously waited for the U.S. November CPI data released on Tuesday. The U.S. dollar index fluctuated violently during the session. Driven by the results of the U.S. bond auction, U.S. bond yields rose sharply in the U.S. market. The yield on the 10-year U.S. bond rose as high as 3.63%, and the yield on the two-year U.S. bond once exceeded 4.4%. The inversion of the 2/10-year key yield once widened to 81 basis points, approaching last Wednesday's deepest inversion in four decades of more than 85 basis points. Spot gold fell below US$1,780 per ounce and closed down 0.89% at US$1781.41 per ounce; spot silver fell below the US$23 mark and closed down 0.68% at US$23.31 per ounce.

Focus on US CPI and interest rate resolutions this week

Last Friday (December 9), the U.S. Department of Labor announced that the PPI in November increased by 7.4% year-on-year, which exceeded market expectations by 7.2%; the month-on-month increase was 0.3%, and the market expected an increase of 0.2%. PPI is an important indicator to measure the price of production-end products, and it is of great significance for predicting CPI data.

The data showed that although the pace of price increases was slowing, the pace of inflation slowing was still not ideal. The data raised concerns about the resilience of U.S. inflation. Interest rate futures traders are currently betting on a 50 basis point rate hike by the Fed in December (the probability is still close to 75%, and the probability of 75 basis points is only 25%).

There is no doubt that this week is a "super week" for the market. The Fed leads major central banks to usher in the last interest rate decision of the year, and it is also a decisive week for the mid-term direction of the US dollar and gold. In terms of data, today (December 13) will usher in the US November CPI as a potential indicator before the interest rate decision.

Inflation remains high for a longer period of time, which limits the rebound in gold to a certain extent, but the market is more concerned about the Fed's terminal interest rate level. U.S. Treasury Secretary Yellen said on Monday (December 12) that U.S. inflation will fall sharply in 2023, adding that "I believe that by the end of next year, if there is no unexpected shock, we will see a significant decline in inflation."

With the recovery of the supply side in the United States and the fall in commodity prices, overall inflation is undoubtedly on a downward trend. At the same time, with the risk of a global economic recession rising in 2023, the Fed cannot ignore the underlying "financial stability", at least for now. Therefore, the Federal Reserve's December interest rate decision may be generally beneficial to the market.

Outlook

In the short term, the price of gold is fluctuating at a high level in an upward trend, but the pressure above 1800 is more obvious. It is not ruled out that the double-top pattern will emerge in the later period. During the day, focus on the support levels of 1780 and 1770. There is still rebound momentum before 1770 is broken. When the heavy data is released, it will effectively break through. If gold effectively breaks above 1800, it may trigger buying follow-up, which is expected to start a new round of uptrend; A further fall around $1750-1730 is ruled out.