XAU/USD bulls advance but may run on empty product

Gold (XAU/USD) took advantage of the greenback’s bid as Asian stocks rallied on Wednesday on the back of a strong equity performance on Wall Street. US Treasury yields are holding highs near multi-year highs ahead of this week’s closely watched US inflation data. The DXY, an index that measures the greenback against a basket of currencies, is down about 0.13% at press time while XAU/USD is up 0.14% for yesterday’s business.

However, there are solid reasons the greenback is in action and gold’s error could be challenged sooner as the consumer price index is expected to reinforce expectations that the US Federal Reserve interest rates will be raised next month. If there’s a stronger-than-expected number, that could give the deal a larger 50 basis point gain.

The bulls face an area of ​​liquidity that could lead to supply entering the market, which will generally cap the price. This brings focus to the downside, leaving $1,811 vulnerable. Gold bulls (XAU/USD) appear to be losing momentum after three consecutive days trending up to 15-day highs, falling to $1,825 during Wednesday’s Asian session . In doing so, the yellow metal represents market anxiety over key US Consumer Price Index (CPI) data amid high multi-month Treasury yields and inflation expectations. America’s dimming.

Benchmark 10-year US Treasury yields remained more flat at 1.956% after rising the previous day to their highest levels since late 2019. On the contrary, US inflation expectations, as measured by the 10year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, remain sluggish around a three-month low flashed during late January, recently around 2.42%. That said, global traders remain anxious over the January inflation figures following the Fed`s upbeat performance. However, another player in the bull`s league, namely the European Central Bank (ECB), tried placating the reflation fears of late.

Also contributing to the gold`s upside momentum is the looming risk of a Russian invasion of Ukraine and the US China trade tussles. On the same line are the latest comments from the Chinese Communist Party (CCP) that was quoted in the South China Morning Post (SCMP) as saying, “China should `support and guide` the healthy development of capital, and prevent the `barbaric growth of capital.`

It`s worth observing that the positive comments from Dr. Anthony Fauci, a leading US health expert, underpin the market`s optimism. However, concerns about the regeneration process are dominating and challenging the public’s optimism in favor of gold prices. “The United States is emerging from the ‘official’ pandemic phase of Covid19, the US President’s chief medical adviser said,” according to the Financial Times (FT). Between these games, Wall Street had another positive day and S&P 500 futures are also trading positively, but the US Dollar Index (DXY) is struggling to extend its recovery moves return. Looking forward, risk catalysts and Fed speak will lead near-term XAU/USD moves ahead of Thursday’s US inflation.