If we look at the performance of gold in the last 15 days, it was only negative on 3 days. So overall, it means that the yellow metal enjoyed one of its most bullish periods in over a year.
Looking ahead, experts believe that gold could turn higher if it passes a few tests. And the first test is the December CPI reading from the USA. The CPI reading from November reveals that it was around 7.1% - And just before that, the CPI reading had touched 9.1%, which was the highest level in four decades.
The market is expecting the CPI to slow down to 6.5% during December... That's the consensus of the economists as well as the experts from Wall Street. And that's the reason why the Federal Reserve is looking to introduce a 25-basis interest rate hike.
Upcoming Rate Hike Will Decide Gold's Fate
But for that to happen, we will have to wait for its meeting on 1st February, when we will see the exact magnitude of a rate hike. Looking back, Fed introduced a rate hike of 50 basis points in December. As for the June and the November meeting, Fed has pushed rate hikes of 75 basis points.
According to third-party tools, the chances of a 25 basis point hike are standing at 84.4%. And the last time we saw a rate hike of this size was in March 2022. At that time, this interest rate hike was the starting point for a series of rate hikes introduced by the Fed.
For the last 3 months, gold prices have been anticipating lower rate hikes from the Fed. That's why it has gained almost 14% since the start of November. And if we see a further decline in the CPI reading, it would send the yellow metal flying high!
If we look at the US Dollar Index, it has been defending the 103 level despite the slowdown in the US inflation. Similarly, the job numbers from the USA have also slowed down significantly.