In today's market landscape, a significant event on the economic calendar is the release of the Consumer Price Index (CPI) for November in the United StatesInvestors are closely monitoring this data point, speculating whether the Federal Reserve’s focus on inflation is indeed waningThe consensus expectation for a month-on-month core inflation reading of 0.3% suggests that any unexpected spike could push the US dollar higherCurrently, market sentiment reflects an 88% probability that the Federal Reserve will cut interest rates by 25 basis points next week, but a high core CPI reading could swing these odds towards a more uncertain outcome.

As we look at the data forecasts, the employment figures have aligned closely with expectations, while inflation saw an unexpected uptick last monthAnalysts anticipate continued mild increases in CPI this month

Market watchers, however, are particularly keen on developments set to unfold in the coming year, especially with plans for additional tariffs which could further exacerbate inflation.

Overall, the market has remained relatively stable since last weekThe bond market exhibits a supportive range, and the dollar index has maintained its support levelsOn the other hand, the S&P 500 has signaled an end to its recent upward trendMeanwhile, both gold and silver prices have seen increases and are nearing their next upward targets.

A significant factor influencing this stability is weakness in US data reported last week, including declines in both ISM manufacturing and services indexes, alongside an uptick in unemployment ratesThis has fueled market speculation about the Federal Reserve potentially lowering rates again in December.

As far as gold is concerned, there seems to be a bullish scenario emerging.

According to the FedWatch Tool, the probability of a rate cut in December surged from 61.58% last Monday to a staggering 86.1% now.

With the upcoming CPI report being one of the last major datasets available before the Federal Reserve meeting, it would take a significant rebound in inflation data to derail expectations of a further 25 basis point cut.

The uncertainty, however, arises from the potential for data to exceed expectations.

Market analysts are divided on the implications of such an outcome for the December meeting; some speculate it could lead to a significant reassessment of the meeting's results—possibly skipping the rate cut altogether—and others suggest it could result in a "hawkish cut," aimed at lowering the Federal Reserve's rate expectations for 2025, rather than skipping a cut.

In terms of specific predictions, the market broadly expects the yearly CPI to rebound to 2.7% after a slight bump in October, with a month-on-month range oscillating between 0.2% and 0.3%. The core inflation data, which the Federal Reserve closely monitors, is expected to hold steady with prior values

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Collectively, the market perceives that progress in controlling inflation may have stalled.

In the event that the data aligns with expectations or deviates slightly, significant impacts on the prospects of a December rate cut are unlikelyThe market's influence would likely tilt towards short-term movements based more on technical and liquidity conditionsTherefore, gold may experience a downward adjustment before eventually turning bullish.

Conversely, if the data reveals a surprising drop, it could bolster the Federal Reserve's confidence in a positive inflation trajectory, granting them more "operational space." This could theoretically benefit the outlook for rate cuts in 2025 and aid in propelling gold prices upward.

However, should the data unexpectedly surge beyond projections, it would create uncertainties surrounding a rate hold in December, pushing the Federal Reserve to adopt a "hawkish cut," thus lowering anticipated cuts into 2025. This scenario is likely to put short-term pressure on gold prices, which could see declines of at least $70.

Reflecting on today’s gold market landscape, broad observations reveal that spreads have significantly widened, approaching 200 points, accompanied by liquidity issues

Some spreads even soared to over 1000 points amid historical events in 2020.

This widening of spreads has led to speculation regarding potential "squeezes" on short positions, sparking discussions within the market about the disparities seen following gold and silver sell-offs in London, which were notably absent in the New York commodity exchange.

Recall that back in March 2020, New York gold spreads soared to about $70 as operations shifted to airlifting gold bars from London overnight.

It was during this time that the use of 400-ounce gold bars for settling Comex trades was initiated.

At present, there are intense conversations among foreign traders regarding today's spread conditions, with speculation falling into two primary categories:

First, there’s a notable shortage of physical supply; second, the expansion of the gold Exchange for Physical (EFP) spreads has led to what some are calling a "squeeze" on short sellers.

Turning to a technical analysis of gold,

it appears poised to challenge resistance in the range of $2706 to $2713 per ounce

A breakout above this resistance level could pave the way towards $2745.

This resistance range is characterized by the 161.8% Fibonacci extension from the wave starting at $2613 and the 61.8% extension from a larger wave commencing at $2605, which is anticipated to extend to a range of $2718 to $2788.

Support levels are anchored at $2673, with a breach potentially triggering a drop to $2654.

Moreover, it's crucial to take note of this evening's upcoming US CPI report for November, as it could essentially reset the momentum for gold prices, possibly establishing the foundation for expectations of a pause in rate reductions come January of next year.

Against the backdrop of the US announcing impending tariffs and the loosening conditions of the labor market, this inflation report stands to be a pivotal determinant for the Federal Reserve's trajectory in hosting future meetings and, by extension, directly influencing the demand for the US dollar and the pricing of non-interest-bearing assets such as gold.

Should tonight's US November CPI reading come in below market expectations, it could catalyze a sharp surge in gold prices towards highs seen on November 25, around $2725. If upward momentum continues, bullish targets would be set at $2750. Surpassing this level might invite fresh entries from gold bulls, especially as prices test historical resistance around $2790.

In contrast, a CPI figure that exceeds expectations could send gold prices sharply lower, necessitating close attention to the 50-day Simple Moving Average (SMA) at $2670 for support, with further scrutiny on the 21-day SMA at $2638 and last week's lows around $2613. A breach of the critical $2600 mark remains a palpable risk.