Gold prices exhibit a modest uptrend, influenced by a weakened US Dollar (USD) on Wednesday. Factors such as increased demand in the gold market, steady central bank acquisitions, and a surge in safe-haven investments due to geopolitical tensions in the Middle East contribute to the positive momentum of XAU/USD. However, the cautious stance of Federal Reserve (Fed) officials, particularly Chairman Jerome Powell’s indication of prolonged higher interest rates, poses a potential downside risk for the precious metal in the short term.
Scheduled for later today, the release of the US Consumer Price Index (CPI) for April holds significance as it may shed light on the Fed’s timing for potential interest rate adjustments. Additionally, the unveiling of April’s Retail Sales data will offer insights into consumer spending patterns. Should inflation data exceed expectations, prompting a more assertive stance from the Fed, it could strengthen the US Dollar and exert downward pressure on gold priced in USD.
Market Update: Gold Prices Gain Momentum Amid Heightened Investment Interest In April, the US Producer Price Index (PPI) surged by 2.2% year-over-year (YoY), surpassing the previous month’s 1.8% rise and meeting market forecasts. Concurrently, the Core PPI, excluding volatile food and energy prices, increased by 2.4% YoY, compared to a 2.1% rise in March. On a monthly basis, both the PPI and Core PPI rose by 0.5% in April.
Fed Chair Jerome Powell remarked that inflation is receding slower than anticipated, with the latest PPI data reinforcing the rationale for maintaining elevated interest rates. Powell hinted at the likelihood of avoiding further rate hikes.
Kansas City Fed President Jeffrey Schmid emphasized persistent inflationary pressures, signaling continued efforts from the central bank to address the issue.
Initial estimates project a slight easing in the annual headline Consumer Price Index (CPI) inflation to 3.4% for April from 3.5% previously, while Core CPI inflation is anticipated to decline to 3.6% from 3.8%.
The US Retail Sales for April are forecasted to decrease by 0.4% month-over-month (MoM) from the initial reading of 0.7%.
According to the CME’s FedWatch Tool, financial markets are currently pricing in a 65% probability of a Fed rate cut in September 2024.
Global gold demand surged by 3% to 1,238 tons in the first quarter of 2024, marking the strongest performance since 2016, as per the World Gold Council’s Q1 report.
Technical Analysis: Gold Price Sustains Positive Outlook Gold prices maintain an upward trajectory, as indicated by the four-hour chart. XAU/USD remains above the critical 100-period Exponential Moving Average (EMA), signaling a bullish sentiment. The 14-day Relative Strength Index (RSI) stands at 60.70, residing in the bullish territory, suggesting a favorable outlook for further upside movement.
A breakout above the May 10 high at $2,378 could pave the way for a rally towards the next significant resistance level near the psychological barrier of $2,400. Further advancement beyond this level may lead to an all-time high near $2,432, followed by the $2,500 mark.
Conversely, a key support level for gold is identified around the $2,325–$2,330 range, characterized by the lower boundary of the descending trend channel, the 100-period EMA, and the May 13 low. Breaching this level could result in a decline towards the $2,300 mark, followed by the May 2 low at $2,281.
