- Gold remains on the back foot for third consecutive day, refreshes intraday low of late.
- Comments from US President Biden, Treasury Secretary Yellen renew US dollar demand.
- Quiet session in Asia, pre-data/event cautious sentiment adds downside pressure on gold prices.
- US Core PCE Price Index, stimulus news should be observed for fresh impetus.
Update: Gold reversed an early North American session dip to the $1,882 area and refreshed daily tops in the last hour. The downtick followed the release of stronger PCE Price Index data, which showed that the Fed's preferred inflation gauge (Core PCE Price Index) jumped 3.1% YoY in April. The reading marked the highest level since 1994 and validated the higher inflation narrative.
This, in turn, fueled speculations that the Fed might be forced to tighten its monetary policy sooner rather than later. That said, the markets were braced for something worse. This was evident from a rather muted reaction in the US fixed income market, which assisted the non-yielding gold to attract some dip-buying at lower levels and climb back closer to the $1,900 mark.
Meanwhile, the upside is likely to remain capped, at least for the time being, amid an extended rally in the global equity markets. The already upbeat market mood got an additional boost after the New York Times reported on Thursday that US President Joe Biden will announce a $6 trillion budget for the fiscal year 2022. This, along with a broad-based US dollar strength, acted as a headwind for dollar-denominated commodities, including gold, and held bulls from placing aggressive bets.
Hence, it will be prudent to wait for some follow-through buying before traders start positioning for an extension of the recent strong positive momentum witnessed over the past two months or so. In this, regards, the $1,912-13 region, or multi-month tops should act as a key pivotal point for short-term traders and help determine the near-term trajectory for gold.
Update: Gold price is holding the lower ground near $1890, having tested Thursday’s low of $1888, as the US dollar remains firmer amid higher Treasury yields. Hopes for a bigger-than-expected US stimulus package continue to keep the global stocks in a sweet spot, with President Joe Biden aiming for $6 trillion in spending plans ahead of the budget release later on Friday. Gold traders also eagerly await the release of the Fed’s preferred inflation gauge, the PCE Price Index for the next direction in prices. Strong US Core PCE inflation figures could reinforce the Fed’s tapering expectations, boosting the yields at the expense of gold.
Gold (XAU/USD) justifies the double whammy of uncertainty over US inflation and stimulus by printing a three-day losing streak, down 0.20% intraday around $1,890 ahead of Friday’s European session. Market’s cautious sentiment back the US Treasury yields, which in turn weigh on the gold prices by the press time, despite the latest pullback from $1,889.
Test time for Biden, Fedspeak…
US President Joe Biden is ready to take the bold move of announcing a $6.0 trillion budget despite struggling to pass the $1.7 trillion spending plans, signaled by the New York Times (NYT). In doing so, Biden aims to lead the global economic recovery while staying ready to ignore the record budget, at least for now. However, Republicans pour cold water on his face while presenting a $1.00 trillion counteroffer. Hence, Today’s budget announcement, followed by a political drama will be entertaining for the markets as Biden’s rejection of the $1.0 trillion offer, also trimming the $6.0 trillion proposal only a bit, could propel risk sentiment and gold prices.
On the other hand, US Personal Consumption Expenditure (PCE) Price Index for April will also be the key amid the current reflation chatters. While the headline figure is no doubt important, gold traders will keep their eyes on the Core PCE Price Index due to its status as the Fed’s preferred gauge of inflation.
Forecasts suggest, the headline number to ease from 2.3% to 2.2% but the Core reading, the key one, is expected to jump from 1.8% to 2.9%, which in turn could keep the reflation fears on the table and put a safe-haven bid under the US dollar. The same should weigh on the gold prices afterward.
It should be noted that US Treasury Secretary, also the ex-Fed Boss, Janet Yellen joined her old pals while suggesting the inflation pressure being transitory, also rejecting the tapering concerns. Though traders aren’t convinced and hence they keep the US Treasury yields up for the second consecutive day by the press time, which in turn drags the gold prices below $1,900.
Moving on, gold traders will have to keep their eyes on the inflation outcome, up for publishing at 12:30 PM GMT, as well as changes in the stimulus figures during the budget announcement, anticipated today, to forecast near-term moves of the commodity. In doing so, US Treasury yields could work as a strong catalyst.
A clear downside break of the two-week-old rising trend line directs gold sellers towards another important support line close to $1,868. However, a 10-day SMA level near $1,882 can act as immediate support.
It’s worth noting that a bearish impulse below $1,868 will make the gold prices vulnerable to decline towards $1,845 support convergence, including 21-day SMA and early May tops.
On the contrary, corrective pullback beyond the support-turned-resistance line near $1,897 will have to provide a daily closing above $1,900 to keep the gold buyers hopeful.
Should the market optimism for gold stay intact past $1,900, the $1,907 and the latest high around $1,914 can test the bulls before directing them to the yearly top surrounding $1,960.
To sum up, gold witnesses a pullback towards the short-term key support line but the bears aren’t allowed a free pass.
Gold: Daily chart
Trend: Further weakness expected
Additional important levels
|Today last price||1891.24|
|Today Daily Change||-5.36|
|Today Daily Change %||-0.28%|
|Today daily open||1896.6|
|Previous Daily High||1903.72|
|Previous Daily Low||1888.28|
|Previous Weekly High||1890.14|
|Previous Weekly Low||1840.9|
|Previous Monthly High||1797.93|
|Previous Monthly Low||1705.84|
|Daily Fibonacci 38.2%||1894.18|
|Daily Fibonacci 61.8%||1897.82|
|Daily Pivot Point S1||1888.68|
|Daily Pivot Point S2||1880.76|
|Daily Pivot Point S3||1873.24|
|Daily Pivot Point R1||1904.12|
|Daily Pivot Point R2||1911.64|
|Daily Pivot Point R3||1919.56|
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.