Gold bulls look comfortable above the $1,900 mark amid a softer US Dollar

• Gold price eyes March high at the $1,915 mark amid falling yields.
• US CPI release looks pessimistic for the US Dollar.
• US Retail Sales and PPI data are the highlights for the day.

Gold price is consolidating above the $1,900 mark amid a softer US Dollar and positive risk sentiment. The US Consumer Price Index (CPI) released on Tuesday relaxed investors as the data came in line with expectations.

The US CPI headlines MoM reading came in at 0.4% from the prior 0.5%, and the YoY reading came in at 6.0% from the prior 6.4%. The core component MoM came in at 0.5%, slightly higher than the prior 0.4%, and YoY variant came in at 5.5% from 5.6%. The service, excluding the shelter component, came in softer than expected. The aforementioned data has been perceived positively by investors and as a result, a surge has been seen in US equity complexes on Tuesday. 

Investors have become increasingly cautious and concerned about Tuesday's US CPI release due to the fallout from Silicon Valley Bank (SVB), which has highlighted the underlying damage within the US banking and financial system. As a result, the Federal Reserve (Fed) may need to halt its rate-hiking cycle sooner than expected to address the situation. However, a stronger US CPI release could pose a challenge to this plan.

Nevertheless, a relatively calm US CPI release has made Fed’s job a little easy, as the most concerning part of the inflationary matrix, ex-shelter, had signaled some easing.

Regarding current market dynamics, the March FOMC meeting could be a one and done deal for the rate hiking cycle, and the market could speculate on the possibility for a rate cut at the end of 2023. However, more clarity is needed on that front.

Moving on to the economic calendar, US Retails Sales data and Producer Price Index (PPI) is on the docket for Wednesday.  

It will be important to watch the US Retail Sales data if it signals any muted retail activity prior to the FOMC meeting on March 22.

Levels to watch