Gold prices show indecisive price action on Thursday as the greenback has been consolidating either. Yesterday, the precious metal gained decently following a strong rejection from lows around $1,192. The prices now stay above the 20-DMA and the $1,200 handle which is however not enough to confirm a shift to a recovery mode.
Everything depends on the dollar behavior as the negative correlation between the buck and the bullion now exceeds 90% in monthly terms, which is more than normal. The greenback in turn is at crossroads as the risk sentiment has improved, while on the other handб the prospects for further Fed tightening help the currency to stay afloat.
In this context, today’s US CPI report will be the key short-term driver for the dollar and for the yellow metal as well. Strong numbers could derail the latest recovery attempts and send gold back below $1,200.
In a broader picture, the downside risks for the metal still persist. However, should the US-China trade tensions abate as the two sides have agreed to resume trade talks, the safe-haven support for the currency will weaken substantially. Such a scenario will open the way to a more robust correction in gold prices.