Gold prices (XAU/USD) saw a modest increase on Tuesday, despite the ongoing strength of the US Dollar (USD). The precious metal’s gains might be limited as investors await significant US inflation data later this week. Recently, the persistent anticipation of higher US interest rates has pressured gold prices. However, escalating tensions in the Middle East have sparked safe-haven buying, providing some support for gold.
This week, investors are focused on key US economic reports. On Tuesday, the US Producer Price Index (PPI) for April will be released, along with a speech from Federal Reserve Chair Jerome Powell. Attention will then shift to the US Consumer Price Index (CPI) due on Wednesday. These reports are expected to provide clues on the timing of the Fed’s next interest rate move. If inflation figures exceed expectations, it could diminish hopes for a Fed rate cut, which typically weighs on gold prices. Higher interest rates tend to decrease the appeal of gold as they raise the opportunity cost of holding non-yielding assets.
Market Movers: Gold Prices Stable as Focus Shifts to US Inflation Data
Federal Reserve Vice Chair Philip Jefferson recently advocated for maintaining current interest rates until there are clearer signs of inflation easing, indicating that he will seek additional evidence of inflation returning to the 2% target. According to a Reuters poll, 70 out of 108 economists predict that the Fed will cut the federal funds rate by 25 basis points (bps) in September, with a further 50 bps cut expected in 2024.
In geopolitical news, Israeli soldiers advanced into northern Gaza to reclaim territory from Hamas fighters on Monday. Tanks and troops also advanced towards Rafah, prompting Palestinian residents to flee, as reported by Reuters.
The US Producer Price Index (PPI) for April is anticipated to show a 2.2% year-over-year increase, while the Core PPI is expected to rise by 2.4%. Meanwhile, the US Consumer Price Index (CPI) inflation is forecast to ease to 3.4% year-over-year in April, down from 3.5% previously. Core CPI inflation is projected to decrease to 3.6% from 3.8% in March.
Technical Analysis: Gold Prices Maintain Upward Momentum
Gold prices edged higher on Tuesday, with the metal maintaining a bullish trend as XAU/USD remains above the key 100-day Exponential Moving Average (EMA) on the four-hour chart. The 14-day Relative Strength Index (RSI) is also in bullish territory at 52.70, suggesting that the current support level is likely to hold.
Gold faces immediate resistance at the May 10 high of $2,378. A sustained rally could push prices towards the psychological $2,400 level. Breaking this barrier might propel gold to an all-time high near $2,432, with a potential run to the $2,500 mark.
Conversely, significant support is expected in the $2,325–$2,340 range, reflecting the confluence of a resistance-turned-support level and the 100-period EMA. Falling below this support could expose the May 2 low of $2,281.
