US CPI Preview: Will inflation reach 8%?

The United States will release CPI data for February on Thursday. Expectations are again for high reading. This month economists are looking for a 7.9% YoY reading versus a 7.5% YoY print in January. The Core CPI print, which excludes the volatile for and energy components, is expected to be 6.4% YoY versus a reading of 6% YoY in January. Much of the world has seen inflation rise over the past year due to supply constraints and rising wages. However, they now also see rising inflation due to higher commodity prices due to the Russia / Ukraine conflict. This price increase will most likely be passed on to consumers later. It is important to note that the price of crude oil for February was trading at 88.15 on February 1st.^st and closed the month at only 95.72. Therefore, the rise in oil prices since March 1^st to 127.50 will not be included in the CPI print.

Higher U.S. inflation means a stronger U.S. dollar. In addition, higher inflation also means traders will look elsewhere to park their money as the Fed raises rates and risk moves lower. That place is usually precious metals, especially Gold.

Gold (XAU / USD) has been trading as a symmetrical triangle since making all-time highs in August 2020. After making a double bottom in the summer of 2021 near 1678.88, the precious metal began to move higher and broke above the upper trend line of the. triangle on February 11th^th, the day the United States announced that Russia could invade Ukraine at any time. In late February, Gold broke through the neckline of the double bottom and was off to the races. The target for a double bottom is close to 2153, however first the pair should cross the all-time highs of 2075. However, note that the RSI in the daily time frame is in overbought conditions, an indication that Gold may be ready for withdrawal.

Source: Tradingview, Stone X

In a 240-minute time frame, the newest 4-hour bar had enough range! , trading from a low of 2013 to a high of 2069.98. First resistance is at the all-time highs of 2075.11. Above, gold may move to the double bottom target at 2153 and then the extension of 127.2% Fibonacci from the August 2020 highs to the double bottom lows in the summer of 2021, near 2183.42. Horizontal support sits at 2001.71, then 1950.27. If Gold falls below there, if it can fall quickly to the neckline of the double bottom near 1916.62.

Source: Tradingview, Stone X

The February CPI print is expected to be strong. The risk is that it will be weaker. If the number is soft, we could see Gold move lower quickly.