The price of gold (XAU/USD) continued its upward trajectory throughout the week, and the gold price breached the $2,400 mark on Friday, marking a gain of nearly 2% for the week. Investor attention remains focused on remarks from Federal Reserve (Fed) officials as they seek indications about the timing of potential policy shifts, particularly within the context of the minutes from the April 30-May 1 meeting.
Gold Gains Traction Amidst Declining US Treasury Yields
The week commenced with gold facing downward pressure, experiencing a loss of approximately 1% on Monday. Absent significant fundamental catalysts, the movement in XAU/USD appeared to reflect a technical correction following the previous week’s surge.
On Tuesday, data from the US Bureau of Labor Statistics (BLS) revealed a 2.2% year-on-year increase in the Producer Price Index (PPI) for April, consistent with market expectations. This announcement led to a weakening of the US Dollar (USD), consequently bolstering gold’s position. Fed Chairman Jerome Powell, speaking at the Foreign Bankers’ Association’s Annual General Meeting, remarked on the mixed nature of the PPI data and suggested that the implementation of restrictive policies to curb inflation might take longer than anticipated, tempering the upward momentum of XAU/USD.
Inflation Data and Treasury Yields Influence Gold’s Trajectory
Wednesday saw the release of data indicating a slight decrease in annual inflation in the US, with the Consumer Price Index (CPI) dropping to 3.4% in April from 3.5% in March. Concurrently, core CPI inflation, excluding volatile food and energy prices, met analysts’ forecasts at 3.6%. The accompanying decline in the benchmark 10-year US Treasury bond yield further facilitated gold’s ascent towards the $2,400 mark.
Fed Commentary and Market Sentiment Impact Gold
In the latter half of the week, Federal Reserve officials’ cautious remarks regarding the potential timing of policy adjustments contributed to a stabilization of the US Dollar, prompting a corrective pullback in gold prices on Thursday.
New York Fed President John Williams expressed a lack of urgency for a rate cut in the near term, describing the April CPI reading as a positive development. Similarly, Richmond Fed President Thomas Barkin and Atlanta Fed President Bostic highlighted that current inflation levels were not in line with the Fed’s objectives, suggesting a possible reduction in the policy rate later in the year.
Technical Outlook for Gold
In terms of technical analysis, the Relative Strength Index (RSI) indicator on the daily chart indicates a bullish bias, with gold maintaining its position within an ascending channel since mid-April. Key support levels lie at $2,400, with resistance anticipated at $2,425 and $2,430. Conversely, a breach of support at $2,335-$2,330 could trigger further downward movement, potentially targeting levels at $2,300 and $2,290.
