Market Overview
Gold (XAU/USD) demonstrates a marginal uptick attributed to a softened US Dollar (USD) on Wednesday. The rise is underpinned by heightened interest in gold from robust over-the-counter (OTC) market investments, consistent central bank acquisitions, and the influx of safe-haven investments amidst geopolitical tensions in the Middle East, bolstering the XAU/USD rate.
Conversely, the prospect of more hawkish stances from Federal Reserve (Fed) officials, notably Chairman Jerome Powell’s inclination towards sustaining elevated interest rates over an extended duration, might exert downward influence on gold prices in the short run.
Upcoming Economic Data Releases
Later today, on Wednesday, the US will release the Consumer Price Index (CPI) for April, shedding light on the Fed’s potential timing for its initial rate adjustment. Simultaneously, April’s Retail Sales figures will give an indication of consumer spending patterns.
Should inflation data surpass expectations, it might prompt the Fed to adopt a more assertive posture, strengthening the USD and potentially applying downward pressure on gold priced in USD.
Assessing the Impact of the US Producer Price Index (PPI)
The April figures for the US Producer Price Index (PPI) showed a year-over-year increase of 2.2%, marking a rise from the 1.8% growth seen in March, which was in line with forecasts. Meanwhile, the Core PPI, excluding volatile food and energy prices, saw a year-over-year surge of 2.4%, up from 2.1% in March.
Both the PPI and Core PPI experienced a monthly uptick of 0.5% in April. Federal Reserve Chair Jerome Powell remarked that inflation is moderating at a slower pace than anticipated, underscoring the rationale behind maintaining higher rates for an extended period. Powell also suggested that there might not be a necessity for further rate hikes. Jeffrey Schmid, President of the Kansas City Federal Reserve, echoed concerns about elevated inflation levels, implying continued efforts by the US central bank in addressing the issue.
Consumer Price Index OutlookRetail Sales Outlook
The anticipated annual headline CPI inflation for April is poised to reduce slightly to 3.4% compared to the prior estimate of 3.5%. Concurrently, core CPI inflation is forecasted to decrease to 3.6% from March’s 3.8%.
US Retail Sales are anticipated to show a month-over-month decline of 0.4% in April, down from the initial reading of 0.7%. Market indicators such as the CME’s FedWatch Tool suggest that there’s approximately a 65% probability of a Fed rate cut by September 2024.
Global Gold Demand Trends
According to the Q1 2024 report from the World Gold Council, global gold demand increased by 3% to reach 1,238 metric tons. This surge represents the most robust first quarter performance since 2016, emphasizing the enduring attraction of gold as a safe-haven investment.
Gold Prices Forecast
Gold (XAU/USD) is presently priced at $2356.69, indicating a decrease of 0.06%. The pivot point lies at $2351.87. Immediate resistance thresholds are observed at $2379.06, $2398.70, and $2417.77, suggesting potential upward objectives. Conversely, immediate support levels exist at $2334.83, $2322.77, and $2307.12.
Technical indicators present a mix of signals. The 50-day Exponential Moving Average (EMA) registers at $2337.36, while the 200-day EMA stands at $2302.87. Gold has successfully concluded a 61.8% Fibonacci retracement around the $2335 region, rebounding from this support level to achieve $2356.
A bullish breakthrough beyond $2362 could propel gold towards the $2379 threshold. However, a breach beneath $2350 might instigate a pronounced selling trend.
