Market update: gold listless ahead of US CPI; bitcoin probes multi-year high

A quiet start to a busy week amid Asian market holidays

It's been a quiet start to what promises to be a busy week, not helped by most Asian markets being closed for holidays. Chinese markets are shut all week for the Lunar New Year, while Hong Kong, Taiwan, and South Korea were also closed today. With little economic data on the calendar today, traders should be mindful of a handful of central bank speeches throughout the day.

On Tuesday, the US Bureau of Labor Statistics will release the latest inflation data at 13:30 UK time. Core inflation y/y (January) is expected to fall to 3.8% from 3.9%, while headline inflation is anticipated to drop to 3% from the previous month's level of 3.4%.

Economic calendar

Upcoming US inflation data

While any easing of US price pressures will be welcomed by the Federal Reserve, it is unlikely to shift the perspective towards a March rate cut. Current market pricing shows just a 17.5% chance of a 25 basis point rate cut in March.

Gold's stability in uncertain times

The daily gold chart highlights the current lack of volatility in the precious metal. Gold remains stuck in a narrow trading range, with the current 14-day ATR showing a reading of just over $20. Resistance remains around the $2,044/oz area, while support is seen at $2,010/oz, ahead of $2,000/oz. Gold traders will be hoping that Tuesday's US inflation data will inject some volatility into the precious metal.

Gold daily chart

Retail sentiment and gold's price trajectory

Retail trader data shows 66.31% of traders are net-long, with the ratio of traders long to short at 1.97 to 1. The number of traders net-long is 4.41% higher than yesterday and 7.80% higher than last week, while the number of traders net-short is 8.05% higher than yesterday and 2.21% lower than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests gold prices may continue to fall.

Bitcoin's surge amidst market volatility

In contrast to gold, Bitcoin traders are enjoying a renewed bout of volatility, with the largest cryptocurrency by market capitalization currently eyeing a test of levels last seen in December 2021. The recent post-ETF sell-off and rally have pushed BTC/USD back above $48k, with the January 11 high at just under $49k seen as the next target. Above here, there is little in the way of resistance on the weekly chart before $52k comes into play.

Countdown to the bitcoin halving event

The latest rally is driven not just by the successful release of a range of spot Bitcoin ETFs over the last month but also by the Bitcoin halving event expected on April 17. Bitcoin halving is an event that occurs approximately every four years and is programmed into Bitcoin’s code that cuts miners’ rewards for adding new blocks to the blockchain by 50%.

This reduction in supply leads to increased scarcity and, if demand for Bitcoin remains constant or increases, drives the price of BTC higher. In 2012, the halving cut BTC mining rewards from 50 BTC to 25 BTC, in 2016 from 25 to 12.5 BTC, and in 2020 from 12.5 BTC to 6.25. In next year’s halving – expected in mid-April - the reward for mining a Bitcoin block will be cut to 3.125 BTC.

Bitcoin weekly chart

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