Gold price fell following the release of the latest US inflation report, which showed a rise in inflation for March. This development has tempered expectations that the Federal Reserve will introduce more supportive economic measures. In response to the inflation data, US government bond yields increased, the US dollar strengthened, and adjusted interest rates also saw an uptick, all of which negatively impacted gold.
As of now, the XAU/USD spot price is $2,336, reflecting a 0.66% decrease after the US Consumer Price Index (CPI) report. According to the US Bureau of Labor Statistics (BLS), March’s CPI exceeded expectations but remained largely consistent with February’s figures in three out of four measures. However, headline inflation surpassed both the annual forecast and last month’s figures.
Key Market Movers: US CPI and Gold’s Response
The US Consumer Price Index (CPI) increased by 0.4% monthly and 3.5% annually, surpassing expectations and last month’s numbers. The Core CPI, excluding food and energy, matched predictions by maintaining a 0.4% monthly and 3.8% annual rate, consistent with February’s data.
Following the release, US Treasury bond yields surged, particularly short-term bonds like the 2-year Treasury note, which climbed by 20 basis points. Concurrently, the US Dollar Index (DXY) saw a significant rise, gaining over 1% to reach a new yearly high of 105.27.
Futures traders at the Chicago Board of Trade (CBOT) now anticipate only two rate cuts, with expectations for the main reference rate to close the year at 4.98%.
In February, the World Gold Consortium reported that the People’s Bank of China made substantial gold purchases, adding 12 tonnes to its reserves, bringing the total to 2,257 tonnes.
Technical Analysis: Gold’s Decline and Potential Support Levels
The recent drop in gold prices from record highs resulted in the formation of an Evening Star candlestick pattern. For XAU/USD, a further dip below $2,329, which marks the opening price on April 8, could signal a deeper correction.
The initial support for XAU/USD lies at $2,303, which is the low point from April 8. A break below this level could push gold down to $2,222, corresponding with March’s 21-day high, with a potential further decline to $2,200.
On the upside, if XAU/USD resumes its upward trend, buyers will be targeting $2,350, followed by $2,400.
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