The price of gold (XAU/USD) exhibits a slight upward bias driven by a weakened US Dollar (USD) this Wednesday. This uptrend is supported by increased demand for gold in the over-the-counter (OTC) market, steady purchases by central banks, and a surge in safe-haven investments amidst geopolitical tensions in the Middle East. However, the gold market faces potential downward pressure due to the Federal Reserve’s (Fed) hawkish stance, particularly highlighted by Chairman Jerome Powell’s indication of maintaining higher interest rates for an extended period.
Later today, the release of the US Consumer Price Index (CPI) for April is anticipated to shed light on the Fed’s timing for potential rate adjustments. Additionally, the publication of April’s Retail Sales data will offer valuable insights into consumer spending patterns. Should inflation data surpass expectations, it may prompt a more aggressive approach from the Fed, bolstering the USD and leading to some selling pressure on gold priced in USD.
Daily Digest Market Movers: Gold Price Gains Momentum on Surge in Investment Demand
- The US Producer Price Index (PPI) increased by 2.2% year-over-year (YoY) in April, matching expectations and marking a slight uptick from March’s 1.8% rise. The Core PPI, which excludes volatile food and energy prices, surged by 2.4% YoY, compared to the previous month’s increase of 2.1%. Both indices saw a monthly increase of 0.5% in April.
- Fed Chair Jerome Powell remarked that inflation’s decline is slower than anticipated, citing the PPI data as further rationale for maintaining higher interest rates for an extended period. Powell expressed the view that additional rate hikes may not be necessary.
- Kansas City Fed President Jeffrey Schmid emphasized that inflation remains persistently high, indicating that the central bank still has work to do to address the issue.
- Annual headline Consumer Price Index (CPI) inflation is forecasted to moderate to 3.4% in April from the initial estimate of 3.5%. Core CPI, which excludes food and energy prices, is expected to decrease to 3.6% from the previous reading of 3.8%.
- US Retail Sales are anticipated to show a decline to 0.4% month-over-month (MoM) in April from the preliminary reading of 0.7%.
- According to the CME’s FedWatch Tool, financial markets are currently pricing in a nearly 65% probability of a rate cut by the Fed in September 2024.
- Global gold demand witnessed a 3% increase, reaching 1,238 tonnes in the first quarter of 2024, marking the strongest performance for a first quarter since 2016, as reported by the World Gold Council’s Q1 2024 report.
Technical Analysis: Gold Price Maintains a Constructive Outlook
The gold price maintains a positive trajectory for the day. As per the four-hour chart analysis, XAU/USD remains in a bullish stance, staying above the critical 100-period Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) indicates bullish momentum, standing at 60.70.
Continued buying momentum beyond the May 10 high of $2,378 could pave the way for a surge towards the next significant resistance level around the psychological barrier of $2,400. A clear breakthrough above this level may expose the all-time high near $2,432, with further potential towards the round figure of $2,500.
Conversely, notable support for gold is anticipated around the $2,325–$2,330 range, marked by the convergence of factors such as the lower boundary of the descending trend channel, the 100-period EMA, and the May 13 low. A breach below this level could lead to a decline towards the $2,300 mark, followed by the May 2 low of $2,281.
Today’s US Dollar Price Analysis
Today, the table displays how much the US Dollar’s value changed compared to other major currencies. It tells us that the US Dollar lost the most value against the Australian Dollar.
The heat map illustrates how much major currencies have changed in percentage compared to each other. You choose a base currency from the left column and then find the quote currency from the top row. The percentage change shown in the box where they intersect tells you how much the base currency has changed against the quote currency. For instance, if you select the Euro from the left column and move across to the Japanese Yen, the percentage change displayed in that box will represent how much the Euro has changed against the Japanese Yen.
