The gold markets did almost nothing during the day on Wednesday as we await for the Consumer Price Index figures coming out on Thursday to give us the latest read on inflation. Remember, gold is quite often used as a way to hedge inflation, so it makes sense that we are waiting to see how good or bad this number ends up being.
The candlestick for the day is essentially a neutral one sitting just below the $1900 level, which is an area that has been a bit of a magnet for price as of late. As we get the CPI figures, I expect to hear a lot of noise, and that might be the first real opportunity to break out to the upside and go much higher. If we can break above the highs of the previous week, then I think it opens up the possibility of gold going to the $1950 level. After that, then it is possible that we could go looking towards the $2100 level, as that is the next major resistance barrier. It does not really matter the reason, but the reality is that the CPI numbers are the main event for the week, and I think that is essentially what we have been waiting on.
If we were to turn around and break down in this market, the $1850 level should offer significant support. After that, there is also the 50-day EMA, the previous downtrend line, and the 200-day EMA all offering a significant amount of support as well. In other words, I think that gold probably has an easier route higher than lower, unless we get some type of major meltdown due to the numbers not looking very inflationary. At this point, I think this is a market that is likely to continue going higher, but I would anticipate that at the very least we will see choppy behavior during the announcement, but that may end up offering a nice buying opportunity for the longer term. After all, gold has been recovering for several months now, and I think that will continue to be the case unless we get some type of massive shock. In general, it looks like inflation is probably going to be the main driver of where we go next.
