Gold prices saw a slight decline on Thursday, settling near $2,380 per ounce after an impressive rally. This recent activity followed the release of U.S. inflation data that shifted expectations around future interest rate decisions, directly influencing the value of the U.S. Dollar (USD) and, in turn, gold prices. Investors are closely watching these changes, as interest rates and USD value are essential factors for gold traders.
Gold Price Retreats Amid Profit-Taking Post CPI Data
Gold prices adjusted downward on Thursday as investors took profits after the previous day’s rally, where gold had gained over 1%. The release of slightly lower-than-expected Consumer Price Index (CPI) data and April retail sales led many to expect a more moderate path for future U.S. interest rates, a key factor impacting gold values.
The CPI data showed a cooling trend in inflation, moving up expectations for the Federal Reserve’s interest rate cut. The CME FedWatch Tool now shows a 75% probability of a rate reduction following the Fed’s September meeting, compared to a 65% chance before the CPI announcement, according to FXStreet’s Lallalit Srijandorn.
Why Lower Interest Rates Support Gold Prices
With expectations for lower rates, gold gains as it becomes more attractive compared to cash or bonds, which yield income. A weaker USD also adds support, as gold, often traded in USD, becomes cheaper for buyers in other currencies.
Gold’s strong demand among central banks, especially those in emerging markets, continues to support its price. Additionally, gold demand grew by 3% to 1,238 tonnes in Q1 2023, the strongest first quarter since 2016, as reported by the World Gold Council (WGC).
Technical Analysis: Gold’s Uptrend Near Resistance
The price of gold (XAU/USD) hovers just below the $2,400 resistance level, maintaining a short-term upward trajectory. Technical indicators, such as the Relative Strength Index (RSI), currently signal an overbought market. This suggests caution, as a retracement may occur if the price exits this zone.
Still, gold’s overall upward trend suggests a bullish outlook, with a potential breakthrough above the $2,400 mark. This move could lead to the next resistance levels at $2,417 and $2,430, the latter being an all-time high.
Conclusion
Gold prices continue to attract attention as economic factors drive market sentiment. With potential changes in U.S. interest rates, gold remains a popular choice, especially among investors seeking stability. For more insights into daily gold price updates, visit our Daily Gold Signal page. Learn about daily gold market movements on our Daily Gold Update.
