Gold price trades with mild positive bias, focus on US CPI and Retail Sales data

  • Gold price edges higher on Wednesday amid the softer USD. 
  • The growth in gold demand and geopolitical tensions lift the price of precious metals.
  • The US CPI and Retail Sales data on Wednesday could offer some hints about the Fed’s monetary policy path.

The gold price (XAU/USD) trades with mild positive bias on the weaker US Dollar (USD) on Wednesday. The rising gold demand from robust over-the-counter (OTC) market investments, consistent central bank purchases, and safe-haven flows amid Middle East geopolitical risk act as a tailwind for XAU/USD. Nonetheless, the Federal Reserve (Fed) officials' hawkish remarks, including Chairman Jerome Powell's suggestion to keep interest rates higher for longer, might drag the yellow metal lower in the near term. 

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Later on Wednesday, the US Consumer Price Index (CPI) for April will be released, and it could offer insights into the timing of the Fed's initial rate adjustment. Also, the Retail Sales for April will be published, and insight into consumer spending trends will be provided. The hotter-than-estimated inflation data could lead the Fed to a more aggressive stance, which boosts the Greenback and exerts some selling pressure on USD-denominated gold. 

Daily Digest Market Movers: Gold price gains momentum amid gold investment demand

  • The US Producer Price Index (PPI) rose 2.2% YoY in April, compared to the 1.8% increase in March and matching expectations. The Core PPI jumped 2.4% YoY in the same period, compared to an increase of 2.1% in March. On a monthly basis, the PPI and the core PPI both rose 0.5% MoM in April. 
  • Fed Chair Jerome Powell said that inflation is falling slower than expected, and the PPI data provided more justification to keep rates higher for longer. Powell added that more rate hikes likely won't be needed.
  • Kansas City Fed President Jeffrey Schmid noted that inflation remains too high, and the US central bank has more work to do.
  • The annual headline Consumer Price Index (CPI) inflation is expected to ease to 3.4% in April from 3.5% in the first estimates. The Core CPI inflation is estimated to drop to 3.6% in April from 3.8% prior. 
  • The US Retail Sales is projected to decline to 0.4% MoM in April from 0.7% in the preliminary reading. 
  • Financial markets are currently pricing in nearly 65% odds of a rate cut by the Fed in September 2024, according to the CME's FedWatch Tool.
  • Global gold demand rose by 3% to 1,238 tonnes, making it the strongest first quarter since 2016, according to the World Gold Council's Q1 2024 report. 

Technical Analysis: Gold price holds a constructive picture

The gold price trades on a positive note on the day. According to the four-hour chart, the yellow metal maintains its positive stance unchanged as XAU/USD holds above the key 100-period Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) stands in the bullish zone at 60.70, suggesting that the path of least resistance is to the upside. 

Any follow-through buying above a high of May 10 at $2,378 could clear the path for a rally to the next major resistance near the $2,400 psychological barrier. A decisive upside break above the mentioned level will expose an all-time high near $2,432 en route to the $2,500 round figure.

On the flip side, the key support level for gold will emerge at the $2,325–$2,330 region, representing the confluence of the lower limit of the descending trend channel, the 100-period EMA, and a low of May 13. The breach of this level will see a drop to the $2,300 round figure, followed by a low of May 2 at $2,281. 

(This story was corrected on May 15 at 06:10 GMT to say, in the title, “Investors await US CPI and Retail Sales data”, not PPI data)

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.

USD   -0.13% -0.10% -0.11% -0.34% -0.15% -0.32% -0.16%
EUR 0.12%   0.01% 0.01% -0.22% -0.05% -0.19% -0.02%
GBP 0.10% -0.01%   -0.01% -0.24% -0.06% -0.21% -0.05%
CAD 0.11% -0.01% 0.02%   -0.21% -0.05% -0.21% -0.04%
AUD 0.27% 0.22% 0.24% 0.23%   0.18% 0.03% 0.19%
JPY 0.15% 0.04% 0.06% 0.03% -0.19%   -0.15% 0.00%
NZD 0.31% 0.19% 0.22% 0.20% -0.02% 0.16%   0.16%
CHF 0.14% 0.02% 0.04% 0.03% -0.19% -0.01% -0.18%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.


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