The financial world's gaze is firmly fixed on the upcoming U.SConsumer Price Index (CPI) for NovemberMarket sentiments are in a delicate balance as investors grapple with the Federal Reserve's ongoing focus on inflationDespite a consensus anticipating a 0.3% month-on-month increase in core inflation, any surprises that deviate from this expectation may trigger a surge in the dollar's valueThe recent sentiment suggests that there’s an 88% probability of a 25 basis point rate cut from the Fed next week, but a higher than expected CPI could drastically alter those odds, putting the likelihood of a cut at a draw of 50-50.

In anticipation of the data, expectations remain somewhat steady compared to last week, as non-farm payroll numbers largely met forecasts while inflation unexpectedly ticked up last monthMoving forward, the market should brace itself for next year's developments, particularly with tariff hikes on the horizon

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Tariffs are inflationary by nature, and their impact on the economy could resonate through consumer prices.

Overall market trends appear to be stabilizing with the debt market demonstrating support levelsThe dollar index has held firm, while the S&P 500 has begun signaling an end to its upward trajectoryMeanwhile, both gold and silver prices have risen, reaching their next bullish targets amidst these fluctuating conditions.

Compounding the uncertainty is a backdrop of generally soft economic data from the U.Sover the previous week, including dips in the ISM manufacturing and services indices, as well as a rise in unemployment ratesSuch data has nudged the market to bolster its bets for another Fed rate cut in December.

According to Fedwatch data, the probability of a December rate cut has jumped significantly from 61.58% last Monday to a striking 86.1% now, underscoring the expectation of easier monetary policy.

Given that the upcoming CPI report will be among the last critical data points available before the Fed's next meeting, a substantial rebound in inflation data seems unlikely if we are to see a 25 basis point cut materialize

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It appears nearly certain unless overwhelming inflation figures arise.

However, the origin of uncertainty stems from any potential data that could exceed expectations.

Analysts in the market suggest that a result higher than anticipated could lead to a significant reevaluation of the December meeting's outcomes, potentially meaning a skip on the rate cut, while others propose that it might compel the Fed to lower its rate cut expectations for 2025, thereby opting for a "hawkish cut" rather than a complete halt.

Delving deeper into this CPI data, analysts generally foresee that overall CPI growth should rebound slightly from last month’s modest increase, projecting a year-on-year rise of 2.7% with month-on-month figures swinging potentially between 0.2% and 0.3%. The Fed is particularly focused on core inflation numbers, which are anticipated to remain stable compared to prior readings

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Collectively, this leads one to believe that the data may indeed reveal a stall in the momentum of the Fed's inflation reduction efforts.

If the data aligns with expectations or shows minimal deviation: The overall impact on December's rate cut projections should be muted, with market activities being short-term in nature and driven by technicals and liquidity in the marketsGold's price action will likely exhibit initial downward movements followed by upward pushes.

Should the data unexpectedly decline: The Fed might gain greater confidence in the inflation retreat narrative, potentially affording more operational flexibility, which, in turn, could ease bullish expectations for rate cuts in 2025 and further propel gold prices upward, resulting in a significant surge.

Conversely, if the data exceeds expectations markedly: This would heighten the intrigue surrounding a no-cut scenario in December, compelling the Fed to potentially adopt a "hawkish cut" stance while scaling back on the anticipated frequency and intensity of rate cuts in 2025, resulting in short-term detriments for gold, with anticipated declines of at least $70.

Reflecting on today’s gold markets, market participants have noted a pronounced widening of spreads, extending to around $200, with liquidity challenges surfacing

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Back in 2020, some spreads witnessed inflation exceeding a staggering 1,000 points.

Market discussions are rife concerning the discrepancies arising from sell-offs in London’s gold and silver markets, with little similar sentiment found in the New York commodities exchange.

It’s worth recalling that back in March 2020, discrepancies in New York gold trading escalated to about $70, prompting expedited air shipments of gold bars from London.

During that time, the 400-ounce gold bars began to settle Comex transactions, marking a noteworthy shift in trading dynamics.

Currently, foreign traders are engaging in a lively debate about today's spreads, surmising two main possibilities:

Firstly, there is speculation surrounding a shortage of physical supplies; secondly, an expansion in EFP (exchange for physical) spreads is speculated, leading to a scenario where shorts might be "squeezed".

On the golden technical outlook:

Gold may be poised to test the resistance zone around $2706-$2713 per ounce, with a breach of this level potentially paving the way to $2745.

This resistance zone comprises a forecast level of 161.8% from wave c starting at $2613 and a 61.8% level from a larger wave c beginning at $2605, which is expected to extend between $2718-$2788.

Lower support lies at $2673; a breach of this level could trigger a decline down to $2654.

It is noteworthy to mention:

The U.S

CPI data set for release tonight could fundamentally reshape the trajectory of gold prices while also laying the groundwork for the rate cut moratorium expected in January next year.

Amid announcements of imminent tariffs from the U.S., coupled with loosened conditions in the labor market, this inflation report is set to play a pivotal role in determining the Federal Reserve's monetary easing trajectory in forthcoming meetings, subsequently impacting the demand for the dollar and the pricing of non-yield-bearing assets such as gold.

Should tonight’s CPI figures come in weaker than anticipated, there is a substantial likelihood that gold prices will rocket past the recent peak of $2725 established on November 25. If this bullish momentum gains ground, buyers could set their sights on $2750. A breach of this level would signal an excellent entry point for bullish traders, potentially leading to further tests against historical resistance of $2790.

However, should the CPI data overshoot expectations upwardly, gold’s trajectory may revert sharply, necessitating vigilant monitoring of the 50-day Simple Moving Average ($2670) for support