Market Overview
On Friday, gold prices experienced a slight decrease, partially offsetting some of the gains made earlier in the week, as Federal Reserve officials adopted a more reserved stance regarding potential interest rate adjustments. Earlier in the week, the precious metal had surged towards the $2,400 per ounce mark, propelled by lackluster economic indicators from the United States. However, a retreat was observed in gold prices on both Thursday and Friday.
US Federal Reserve Officials Caution Against Imminent Rate Reductions
The downturn in gold prices ensued after Federal Reserve officials cautioned against anticipating immediate interest rate reductions. Members of the central bank’s rate-setting committee emphasized the requirement for more compelling evidence indicating a decline in inflation, beyond the relatively modest April inflation figures. Consequently, traders revised down their expectations for a rate cut in September, leading to a rebound in both the US dollar and Treasury yields. Despite this retracement, softer-than-anticipated readings in the consumer price index (CPI) have positioned gold for a 0.7% increase over the week. The metal continues to hover near its all-time high, surpassing $2,430 per ounce, although imminent attainment of this level seems improbable.
Economic Indicators Influencing Gold (XAU/USD) Price Movements
On Friday, gold (XAU/USD) exhibited a bearish trajectory, retracting from its proximity to the $2,400 mark. Previous upswings were propelled by April’s softer-than-anticipated U.S. inflation figures, fostering optimism for potential Federal Reserve rate reductions. Nevertheless, the cautious approach adopted by Fed officials toward sustaining elevated borrowing rates has tempered these anticipations, bolstering the U.S. dollar and diminishing the appeal of gold. Given the absence of significant U.S. economic data releases, market participants are directing their attention towards forthcoming statements from Fed officials, including Kashkari, Waller, and Daly, scheduled for later in the day.
Additional Influences Affecting Gold Price Movement
In the week ending May 11, Weekly Initial Jobless Claims surged to 222K, surpassing both the prior week’s 232K and the anticipated 220K figure. Meanwhile, April saw Housing Starts experience a notable 5.7% month-over-month increase, reaching 1.36 million, while Building Permits declined by 3% to 1.44 million. Atlanta Fed President Raphael Bostic suggested a potential slowdown in inflation, but he awaits confirmation from forthcoming May and June data. Cleveland Fed President Loretta Mester cautioned against premature assessments of inflation’s trajectory, highlighting the need for more comprehensive data. Richmond Fed President Tom Barkin stressed the importance of sustaining high borrowing costs to attain inflation targets. Market sentiment has shifted, with financial markets now estimating a nearly 75% likelihood of a Fed rate cut in September, up from 65% earlier in the week. Moreover, according to the CME FedWatch Tool, investors anticipate full 25 basis point reductions by the end of the year.
Gold Prices Forecast
Gold (XAU/USD) is currently priced at $2,378.755, marking a 0.15% increase for the day. Notable levels on the 4-hour chart warrant attention from traders. Positioned as a critical support level, the pivot point resides at $2,373.92. Immediate resistance is identified at $2,395.84, followed by $2,410.62 and $2,425.87.
On the downside, initial support lies at $2,357.95, with further support zones at $2,336.74 and $2,318.86. Technical indicators present a balanced outlook, with the 50-day Exponential Moving Average (EMA) registered at $2,354.84 and the 200-day EMA standing at $2,312.01. A Doji candle formation above the pivotal level of $2,373 is anticipated to stimulate a buying trend.
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