The price of gold is currently consolidating after a significant pullback from record highs of $2,943, struggling to maintain momentum below the $2,900 mark early on Wednesday. With all eyes now on the release of the high-impact US Consumer Price Index (CPI) data later today, market participants are eager to see whether the data will provide the fresh directional impetus needed to guide the next move in gold prices.

Will US CPI Data Add Pressure to Gold Price Correction?

Gold has found itself in a bit of a limbo, as markets grapple with uncertainty surrounding US President Donald Trump’s potential reciprocal tariffs and the Federal Reserve’s (Fed) future monetary policy. Traders are cautious, with many taking profits on long positions as they prepare for the critical US inflation data, which could either fuel or soften the recent gold price correction.

At the forefront of the speculation is whether Trump’s reciprocal tariffs will come into effect. Traders remain on edge, as Trump’s comments earlier this week left the timing of the tariffs uncertain. When asked about the tariffs during an event on Tuesday, President Trump simply stated, “We’ll see.”

The Wall Street Journal also reported that Trump’s team is working on enacting the tariffs via executive action, potentially bypassing Congress. These tariffs have revived the US Dollar (USD) as a safe-haven asset, which in turn, has put pressure on gold prices. On top of that, comments from Fed Chairman Jerome Powell during his Congressional testimony have added to the bearish sentiment surrounding the precious metal.

Fed’s Hawkish Tone Drives Market Expectations

Powell’s remarks about the economy remaining strong and the Fed’s decision to hold its current policy stance have shifted market expectations. Many analysts now anticipate only one Fed rate cut later this year, likely in July. This shift has led to a recovery in US Treasury bond yields, which has further weighed on gold, as the metal does not offer interest returns like bonds do.

What’s Next for Gold Prices?

The next major catalyst for gold prices will be the release of the US CPI data and any updates on Trump’s tariffs. January’s annual CPI inflation is expected to remain at 2.9%, with the core figure predicted to ease slightly to 3.1%. Monthly numbers are forecasted to show a 0.3% increase in both the headline and core CPI.

If the CPI data surprises on the upside, it could further fuel hawkish expectations regarding the Fed’s policy, driving the USD and US Treasury yields higher while exerting additional downward pressure on gold. On the flip side, a downside surprise could reignite speculation about potential Fed rate cuts, possibly sending gold prices higher again.

Additionally, the timing and implementation of Trump’s tariffs will continue to be a key driver in the market. If the tariffs go into effect as expected, the US Dollar could rise, putting further strain on gold prices.

Technical Analysis: Gold Price on the Four-Hour Chart

Looking at the technical side of things, gold price recently failed to reach the measured target of $2,962 for the Bull Flag pattern on the four-hour chart, and it pulled back sharply on Tuesday. Gold sellers currently have the upper hand, testing the critical 21-period four-hour Simple Moving Average (SMA) at $2,890.

If gold closes below this level, it could signal further downside, with the next target around the 50-period SMA at $2,857. The 100-period SMA at $2,808 remains a critical support level, and a break below this could signal a deeper correction.

The Relative Strength Index (RSI), which currently stands near 52.50, has started to turn lower, suggesting that the downside may be limited for now. For an upward move to gain momentum, gold would need to break and hold above the static resistance at $2,905. If buyers manage to push past this level decisively, it would open the door for a potential retest of the record highs near $2,943.

Gold remains in a state of uncertainty as markets await both the US CPI data and any developments surrounding Trump’s tariffs. Traders are cautious and positioning themselves ahead of these key events, and the direction of gold prices will largely depend on how these factors play out in the coming days. While the short-term outlook remains mixed, the longer-term trend will likely be dictated by inflation data, Fed policy, and geopolitical developments. For now, all eyes are on the data release later today, which could provide the much-needed clarity to determine the next move for gold.