Gold: CPI Lowest In 9 Months, Seasonal Top In Place For 20% Correction Into Fall Of 2023

Fundamentals

Gold is often used as a hedge against inflation, as it is seen as a store of value that is not subject to the same inflationary pressures as fiat currency. PPI, or Producer Price Index, is a measure of the average change over time in the selling prices received by domestic producers for their output, and it can be used as an indicator of future inflationary trends.

When PPI increases, it can be a sign that prices for goods and services will rise, potentially leading to inflation. This can be seen as positive for gold prices, as investors may turn to gold as a hedge against inflation. Conversely, when PPI decreases, it can be a sign of deflationary pressures, which could negatively impact gold prices.

It’s worth noting that while PPI is a useful indicator of inflationary trends, it is not a direct measure of inflation as experienced by consumers. The Consumer Price Index (CPI) is a more commonly used measure of inflation for this purpose.

In general, gold tends to perform well during periods of inflation or when inflationary pressures are expected to rise, as investors turn to gold as a safe-haven asset. However, gold prices can also be influenced by a wide range of other factors, such as geopolitical tensions, interest rates, and global economic conditions, so it’s important to consider these factors as well when analyzing gold prices.

Consumer Price Index Report For March 2023 & CPI Numbers

The report notes that economic data is impacting both gold and stocks, with the recent CPI Inflation Report for March showing signs of easing inflation for the US consumer, but the core number remains a concern. Comments from several Fed speakers, including Mary Daly and Thomas Barkin, added to the mix as investors try to gauge the central bank’s next rate hike decision. San Francisco Fed President Mary Daly noted that while there was good news in the CPI, the headline release was still elevated and not consistent with price stability. Daly will be specifically looking at core services to see if they are coming down, particularly core services minus housing.

The Consumer Price Index (CPI) in the US showed a drop in annual inflation for the ninth month in a row, declining to 5% for the 12 months ended in March from 6% in February. Grocery prices also fell on a monthly basis for the first time since September 2020. Shelter costs were the largest contributor to the monthly gain, offsetting sharp declines in energy categories. Core CPI, which strips out food and energy, grew 0.4% for the month, resulting in a 5.6% annual growth rate, well above the central bank’s 2% target. The March CPI trajectory doesn’t take another rate hike off the table, and economists expect the Federal Reserve to increase interest rates at the May meeting.

Gold 360 day cycle standard deviation report

As we take a look at the 360-day cycle and standard deviation patterns starting Sep. 28, 2023 – Sep. 23, 2024, we can identify the average price or mean at 1,773. The extreme level number 1 and 2 of standard deviation is 1,896 – 2,093. We can clearly see that the low on Sep. 28, 2023 was 1,656.80, and we made the recent high on April 12, 2023, at 2,063.4 per oz. With the first target of 1,895 completed and the recent high, it increases the probability the 360-day cycle top target range has been completed. A close below 1,895 would be confirmation and activate 1,773 target to the downside or average price. A close below opens up the extreme below the mean or standard deviation of 1,575 – 1,452 levels of support.

30 Day Cycle Standard Deviation Report

As we take a look at the 30-day cycle and standard deviation patterns starting April 1, 2023, we can identify the average price or mean at 1,949. The extreme sell level number 1 and 2 of standard deviation is 2,069 – 2,151. The extreme buy level number 1 and 2 of standard deviation is 1,867 -1,747. We can clearly see that the low on April 3, 2023, was 1,865.9, and we made the recent high on April 12, 2023, at 2,063.4 per oz. With the first target range of 2,069, it satisfied the pattern and with the recent high, increases the probability the 30-day cycle top target range has been completed. A close below 1,949 opens up the extreme below the mean or monthly standard deviation levels of 1,867 – 1,747, monthly.

Let’s take at the weekly standard deviation report published in the Marketplace section under Mean Reversion Trading and see what trading opportunities short-term we can identify.

GOLD: Weekly Standard Deviation Report

Apr. 15, 2023 4:03 PM ET

Summary

• The weekly trend momentum of 1,942 is bullish.
• The weekly VC PMI of 2,025 is bearish price momentum.
• A close above 2,025 stop negates this bearishness neutral.
• If long, take profits 2,051-2,091. If short, take profits 1,988 – 1,959.
• Next cycle due date is 4.15.23.

Weekly Trend Momentum:

Gold futures closed at 2,016, and the market closed above the 9-day SMA 1,942, indicating that the weekly trend momentum is bullish. However, if the market closes below the 9 SMA, the weekly bullish short-term trend will shift to neutral. Traders should keep an eye on the market and the 9 SMA to stay on top of the trend.

Weekly Price Momentum:

The market closing below the VC Weekly Price Momentum Indicator at 2,025 confirms that the price momentum is bearish. This indicates that prices are likely to continue moving downward in the short-term. However, if the market closes above the VC PMI, the weekly bearish trend will shift to neutral.

Weekly Price Indicator:

To maximize profits, traders should look to take profits on shorts into corrections at the Buy 1 and 2 levels of 1,988 – 1,059 and go long on a weekly reversal stop. If long, use the 1,959 level as a Stop Close Only and Good Till Cancelled order. Look to take profits on longs as we reach the Sell 1 and 2 levels of 2,054 – 2,091 during the week.

Cycle:

The next cycle due date is 4.15.23. Traders should keep an eye on the market and market conditions leading up to this date.

Strategy:

Traders who are short should take profits between 1,988 – 1,959, while traders who are long should take profits between 2,054 – 2,091. This strategy can help traders optimize their returns and minimize their risk in the market.