Gold Price Forecast: XAU/EUR reaches new 2021 highs above €1,600 as US CPI jumps the most since 1990

• US Inflation figures rose at the fastest annual pace since 1990.
• XAU/EUR: Broke the €1,600, once the headline crossed the wires, as investors flew to gold as an inflation hedge, as real-yields extend its losses.
• XAU/EUR: Two resistance levels lie on the way towards €1,700.

Gold spot against the Euro, rallies 1.42%, trading around €1,605 during the New York session at the time of writing. Factors like US inflation figures rising towards the highest readings since 1990 and a dovish European Central Bank (ECB) spurred a €20 jump on Wednesday’s price action. Furthermore, the market sentiment is in a risk-off mood, which gained follow-through once US Inflation figures were known.

US Consumer Price Index increased by 6.2%, the largest reading since 1990

In the US economic docket, the awaited inflation figures were unveiled. The Bureau of Labor Statistics (BLS) revealed that the Consumer Price Index (CPI) surged 6.2% on a year-over-year basis, up from 5.4% in September, leaving behind the 5.3% estimations by economists. Further, the Core CPI reading, which excludes volatile items like energy and food, expanded by 4.6% in the same period, higher than the 4.8% foreseen by the market. 

The US real yields plummeted once the figure crossed the wire, with the US 5-year TIPS, real yields measurement dropping from -1.85% to -1.941%, the second-lowest reading since July 2021, per Reuters.

XAU/EUR Price Forecast: Technical outlook

Daily chart

The yellow-metal rose sharply through the €1,600 roof when the headline crossed the wires, leaving the January 5 high at €1,591 previous resistance level behind, which will act as support. Additionally, the Relative Strength Index is at 72, aims higher, while the daily moving averages (DMA’s) remain well below the spot price, supporting the upward bias.

The first resistance level would be November 9, 2020, high at €1,652. A breach of the former would expose the August 8, 2020, high at €1,689, and then the psychological €1,700 figure.