Gold prices are in a major focus right now ahead of the US CPI print due to be released on Wednesday at 1:30 UK time. Gold is extremely sensitive to US interest rate expectations and dollar moves. This has meant that gold prices are being pushed and pulled around on fluctuating expectations surrounding the future path of US rates. Therefore, it is a helpful instrument for expressing a bias in how the Fed is doing in its inflation battle.

On Wednesday, markets will find out how inflation is doing in the US. There is a strong potential for gold movements on this print. If inflation comes in higher than markets are expecting this should send yields higher, the dollar higher, and gold lower. On the other hand, if inflation comes in lower than the markets are expecting this should send yields lower, the dollar lower, and gold higher.

Note these interesting seasonals over the US CPI print which show gold has a 60% upside bias on the day before and the day after the event. So, will we see gold gain into Wednesday’s CPI meeting? Will gold prices end up moving lower if the CPI print is much higher than the market is expecting?

Major Trade Risks: There are two-way risks for both buyers and sellers here as this event is likely to be very volatile. The biggest risk is if markets ignore the latest CPI print and instead focus on the big picture that inflation, even if lower than economists were expecting, is still way above the Fed’s target.

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