**Gold Prices Await US Inflation Data** Gold prices are currently supported around $3,340, but any rise is limited. The market is uncertain ahead of US inflation data, with technical indicators hinting at possible declines. The XAU/USD pair came down from $3,400 and is now stable between $3,335 and $3,345. This range is near the 50% Fibonacci retracement level from an earlier rally in August, providing solid support. During the European session on Tuesday, the pair traded sideways while the US Dollar Index consolidated. There is noticeable market caution as everyone waits for the US CPI figures, which could impact short-term trends. Gold confirmed a trend change after dropping below $3,390, reaching the target at $3,345. The technical signs are still negative, suggesting that a drop below $3,335 could push prices toward the $3,305-$3,315 area. Initial resistance is at $3,380, with potential to test the $3,400-$3,410 range. If prices break above this level, it would reverse the bearish outlook and bring $3,440 into consideration. Central banks, especially from emerging markets, continue to accumulate gold. They purchased 1,136 tonnes in 2022. Gold’s price is influenced by its opposite relationship with the US Dollar and Treasuries, especially during times of geopolitical or economic instability. **Trapped Within a Narrow Band** Gold is currently stuck in a narrow band around $3,340. Significant price movements are on pause as everyone awaits important US inflation data later this week. The technical outlook suggests prices might still decline from this point. Our primary focus is the US Consumer Price Index report set for Thursday. If inflation exceeds the expected 3.1%, the US Dollar may strengthen, pulling gold down towards the $3,305-$3,315 support zone since this would imply that the Federal Reserve may maintain high interest rates. Conversely, if inflation is lower than 2.9%, we could see a swift change in sentiment. This would likely weaken the US Dollar, allowing gold to rise and test the $3,380 resistance. A decisive break above $3,410 would void the recent bearish trend. Given the negative technical signals, some traders might contemplate put options to protect against a decline. Purchasing puts with strike prices like $3,330 or $3,300 could be a strategy to profit if prices drop below support. This serves as insurance against a price fall following the inflation report. On the flip side, traders expecting an upside surprise may look at call options with strike prices above $3,380. A drop in inflation could make these positions profitable, betting on a turnaround from the recent downward pressure. It’s also essential to monitor the US 10-year Treasury yield, which is stable around 4.45% before the data release. The US Dollar Index is strong as well, hovering near a monthly high of 106.20. Ongoing strength in these markets tends to put pressure on gold prices. Finally, it’s worth noting the long-term support from central banks. They bought a record 1,136 tonnes in 2022, and reports for early 2023 show they have already added over 250 tonnes to their reserves. This ongoing buying offers strong protection against any significant price drops. Create your live VT Markets account and start trading now.

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