Gold extends uptrend following US Retail Sales and CPI data

  • Gold rises above the May highs after the release of lower-than-expected US CPI and Retail Sales data.
  • The data hurt USD and indicates the possibility interest rates might fall more quickly than expected, aiding Gold.
  • Robust central-bank demand is a key factor in keeping the precious metal bid. 
  • After a deep correction, XAU/USD resumes its uptrending bias and pushes higher. 

Gold price (XAU/USD) trades higher on Wednesday after the release of US Consumer Price Index (CPI) and Retail Sales data for April came out lower than economists had expected. The data means the Federal Reserve (Fed) might cut interest rates sooner than had previously been thought. Lower interest rates or their expectation are positive for Gold because it reduces the opportunity cost of holding a non-yielding asset. 

Gold rises after release of US data

US headline CPI rose 0.3% in April which was below expectations of 0.4% and March's 0.4%. On a year-over-year basis CPI met expectations of a 3.4% rise, which was below the 3.5% YoY of the previous month of March, according to data from the US Bureau of Labor Statistics.

US CPI ex Food and Energy came out in line with expectations, rising 0.3% MoM in April and 3.6% YoY, but this was still lower than the 0.4% and 3.8% of the prior month respectively. 

US Retail Sales in April, meanwhile, came out well below expectations, registering 0.0% growth in April when 0.4% had been estimated, down from 0.6% in March, according to data from the US Census Bureau released at the same time. The fall in retail sales sounded another note of caution regarding the US economy that could further encourage Fed officials to consider cutting interest rates. 

The combination of disinflation reflected in the CPI data and flatlining Retail Sales may prompt the Fed to consider cutting interest rates in the near term, a move that would weigh on the US Dollar (USD) but be bullish for Gold. 

Gold price creeps higher on the back of sustained demand 

Gold price also remains bid on the back of continued safe-haven demand due to geopolitical and global trade tensions. 

In a speech at Stanford last week, Gita Gopinath, the First Deputy Managing Director of the International Monetary Fund (IMF), said that central banks, particularly in emerging markets, have been hoarding Gold in recent years as a hedge against the risk of, among other things, sanctions imposed by the West. 

“Gold purchases by some central banks may have been driven by concerns about sanctions risk. This is consistent with a recent IMF study confirming that FX reserve managers tend to increase Gold holdings to hedge against economic uncertainty and geopolitical including sanctions risk,” said Gopinath. 

The view is also backed up by data from the World Gold Council (WGC) showing strong demand in 2024 from central banks. 

Given the heightened tensions in the Middle East, Ukraine and the increasingly polarized stand-off between the BRICS nations and US-led allies, the trend is expected to sustain, keeping Gold prices supported.

Technical Analysis: Gold price recovers after backslide

Gold price (XAU/USD) has recovered back up to almost the level of the May highs at $2,379, after finding support and resuming its short-term uptrend.

XAU/USD 4-hour Chart

Given the old saying “the trend is your friend”, Gold is likely to continue pushing higher, with the next target at around $2,400, roughly at the April highs. A break back above the $2,378 May 10 high would provide extra confirmation. 

The medium and long-term charts (daily and weekly) are also bullish, adding a supportive backdrop for Gold.

Economic Indicator

Consumer Price Index (MoM)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM figure compares the prices of goods in the reference month to the previous month.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Read more.

Last release: Wed May 15, 2024 12:30

Frequency: Monthly

Actual: 0.3%

Consensus: 0.4%

Previous: 0.4%

Source: US Bureau of Labor Statistics

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.


Share: Feed news

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.

Recommended content

Recommended content

Editors’ Picks

EUR/USD retreats toward 1.0850 on modest USD recovery

EUR/USD retreats toward 1.0850 on modest USD recovery

EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.


GBP/USD holds above 1.2650 following earlier decline

GBP/USD holds above 1.2650 following earlier decline

GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.


Gold climbs to multi-week highs above $2,400

Gold climbs to multi-week highs above $2,400

Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.

Gold News

Chainlink social dominance hits six-month peak as LINK extends gains

Chainlink social dominance hits six-month peak as LINK extends gains

Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday. 

Read more

Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates

Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates

After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.

Read more