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Gold Price Forecast: XAU/USD retreats below $1,830 after CPI-inspired fluctuations

  • XAU/USD fluctuated wildly after April inflation data from US.
  • 10-year US T-bond yield is up more than 2% on Wednesday.
  • Additional losses are likely with a daily close below $1,820.

The XAU/USD pair struggled to make a decisive move in either direction and closed unchanged on Tuesday. After staying relatively quiet during the first half of the day on Wednesday, the pair fluctuated sharply as investors assessed the latest inflation data from the US. Following a sharp upsurge to $1,843, gold reversed its direction and was last seen losing 0.5% at $1,828.

The US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) jumped to 4.2% on a yearly basis in April from 2.6% in March. This reading came in much higher than the market expectation of 3.6% and provided a boost to the US Treasury bond yields. At the moment, the benchmark 10-year US T-bond yield is up 2.3% at 1.663%. Moreover, the US Dollar Index is up 0.4% at 90.55, making it difficult for XAU/USD to climb into the positive territory. 

Commenting on the data, "apart from well-known base effects – CPI tumbled this time last year due to covid – bottlenecks such as the global chip shortage and the quick reopening could be behind the move," said FXStreet analyst Yohay Elam. "That could cool down as supply meets demand. Overall, there is room for the trend to switch – an upswing in shares and a fresh fall for the dollar."

Gold technical outlook

On the downside, $1,820 (Fibonacci 50% retracement of the January-March downtrend) aligns as the first support. A daily close below that level could open the door for additional losses toward the key support at $1,800 (psychological level, 100-day SMA) and $1,790 (20-day SMA).

Resistances, on the other hand, are located at  $1,850 (Fibonacci 61.8% retracement level, 200-day SMA) and $1,860 (static level). On the daily chart, the Relative Strength Index (RSI) indicator is edging lower toward 50, suggesting that buyers are struggling to remain in control of gold's action.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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The US Dollar fell. Gold didn't rally. That tells you everything
Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.