- Gold pressured amid fears of rising inflation, interest rates.
- US dollar’s haven demand lifted on Middle East tensions.
- Disappointing US CPI could revive gold’s bullish momentum.
- Commodity prices hit all-time highs – What's next? [Video]
Having failed to sustain above $1840 once again Gold price fell as low as $1818 on Tuesday before recovering losses to end the day marginally higher around $1837. The two-way price action kept investors on their toes. Gold prices dropped sharply after the US dollar rebounded from multi-month lows on the renewed risk-aversion wave, triggered by rising inflation concerns. Investors remain concerned about overheating of the US economy, as the Treasury yields recaptured the 1.60% level. Rising inflation expectations brought the Fed’s taper calls back on the table, which spooked the markets and triggered a sell-off on Wall Street. The US stocks slide, however, helped gold recover some shine.
Heading into the US CPI showdown this Wednesday, gold returns to the red zone, as the US dollar’s safe-haven demand remains in vogue amid an escalation of tensions between Israel and Gaza. Further, markets remain unnerved ahead of the US CPI April month report amid concerns of a potential acceleration in price pressures and its implication on the economy.
The US CPI is seen arriving at 0.2% MoM in April vs. March’s 0.6% while the core figure is seen steady at 0.3%. On an annualized basis, the CPI is likely to accelerate to 3.6% in the reported month vs. 2.6% previous. The 12-month core rate is seen higher at 2.3% vs. 1.6% last. A CPI disappointment could tame inflation fears and squash Fed’s tapering and tightening expectations, which is likely to trigger a renewed burst of demand for the gold price.
Gold Price forecast Chart - Technical outlook
Gold forecast: Daily chart
Gold’s daily chart offers a constructive forecast, suggesting that a test of the 200-daily moving average (DMA) at $1849 remains on the cards.
The 14-day Relative Strength Index (RSI) is flatlined just beneath the overbought region, currently hovering around 67.50.
Meanwhile, an impending bull cross on the given time frame keeps the upbeat momentum intact around the gold price forecast.
The 21-DMA is on the verge of cutting the 100-DMA from below, which would represent a bullish crossover.
A daily closing above the 200-DMA could revive the bullish bets towards the $1900 mark.
Alternatively, gold prices could challenge Tuesday’s low of $1818, below which the May 7 low of $1813 will be on the sellers’ radars.
The 100-DMA at $1796 could act as a strong support if the correction from multi-month highs of $1846 regains traction.
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