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Gold Price Forecast: XAU/USD retreat despite weakening us dollar as inflation concerns linger

  • Gold slips 0.33% as US inflation data fuels uncertainty over Fed tightening cycle.
  • US Treasury bond yields drop while Biden and lawmakers continue debt ceiling discussions.
  • China’s expanding gold reserves cushion XAU/USD’s fall; the market awaits Thursday’s PPI release.

Gold price slumps following the release of April’s inflation in the United States (US), which initially sent the XAU/USD to its daily high of $2048.15, though it retraced even though the US Dollar (USD) weakened on the news. Hence, the XAU/USD is trading at $2027.54, down 0.33%.

Investors eye PPI data, fed speculations, and debt ceiling talks amid market volatility

US Treasury bond yields dropped, with 2s and 10s, down eight and seven and a half bps, each at 3.935% and 3.446%, respectively. The greenback, which has an inverse correlation with Gold prices, slips 0.14%, down to 101.514.

The US Labor Department revealed the Consumer Price Index (CPI) for April continued to decelerate, as the CPI rose 0.4% MoM, aligned with estimates, while the year-over-year (YoY) came at 4.9%, below forecasts of 5%. Excluding volatile items like food and energy, the core CPI advanced 0.4% MoM, while annually based stood at around the 5.5% threshold.

Meanwhile, speculations that the US Federal Reserve (Fed) will pause its tightening cycle have increased, as shown by the CME FedWatch Tool, with odds at 95%.

On Tuesday, President Biden met with House Speaker Kevin McCarthy and other congressional leaders to discuss a possible increase or temporary stopping of the US debt ceiling. Even though there was no agreement, discussions would be held on Friday. On Monday, the US Treasury Secretary, Janet Yellen, has warned that if the debt ceiling is not raised, the government could run out of money by June 1.

As May comes to a close and if no extension is agreed upon, there will likely be an increase in overall market unease.

In other data, news that China is expanding its Gold reserves and may be abandoning the US Dollar cushioned XAU/USD’s fall. Sources cited by Kitco commented that China’s reserves increased by 8.09 tons in April.

XAU/USD Price Forecast: Technical outlook

XAU/USD Daily chart

The XAU/USD is still upward biased, though price action is forming a spinning top around the week’s highs. If XAU/USD achieves a daily close below the May 9 close of $2034.15, that could exacerbate a fall toward the day’s low at $2021.67 before testing the $2000 psychological level.

Of note, albeit at bullish territory, the Relative Strength Index (RSI) indicator aims toward a neutral level, suggesting that profit-taking took place as investors eye the release of Thursday’s Producer Price Index (PPI) release. The 3-day Rate of Change (RoC) shifted above the neutral level. Therefore, mixed signals by oscillators could refrain traders from opening fresh bets.

XAU/USD

Overview
Today last price2030.08
Today Daily Change-4.33
Today Daily Change %-0.21
Today daily open2034.41
 
Trends
Daily SMA202007.82
Daily SMA501961.31
Daily SMA1001913.63
Daily SMA2001817.25
 
Levels
Previous Daily High2037.65
Previous Daily Low2019.62
Previous Weekly High2079.76
Previous Weekly Low1977.12
Previous Monthly High2048.75
Previous Monthly Low1949.83
Daily Fibonacci 38.2%2030.76
Daily Fibonacci 61.8%2026.51
Daily Pivot Point S12023.47
Daily Pivot Point S22012.53
Daily Pivot Point S32005.44
Daily Pivot Point R12041.5
Daily Pivot Point R22048.59
Daily Pivot Point R32059.53

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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