Gold Price Forecast: Slipping Below Support Ahead of US Inflation Data – Levels for XAU/USD

Gold Price Forecast: Slipping Below Support Ahead of US Inflation Data – Levels for XAU/USD

Gold prices have been trading lower ahead of the November US inflation report (CPI), which is due to show the highest inflation pressures in the US in nearly 40 years. Due in at +6. 8% y/y, this would match the fastest rate of inflation since March 1982. And yet, despite these expected readings, gold prices aren't benefiting; in fact, gold prices have been declining over the course of the week, throwing into question the precious metal's role as an 'inflation hedge.' The picture is a bit more complicated in the near-term. While US inflation rates are running higher, pushing up nominal bond yields, longer-term inflation expectations have actually been declining. Perhaps a symptom of expected Federal Reserve rate hikes in 2022 and beyond, the US 5y5y inflation swap forward is off of its weekly high by about 5-bps to 2. 484%, and is down from its 2021 peak of 2. 646% on October 26. As US Treasury yields – nominal yields – continue to inch higher, the decline in market-measures of longer-term US inflation expectations is curating a churn higher in US real yields. Gold prices don't like environments where real yields increase, which is what may explain bullion's lack