Interest Rate Cut Expectations Propel Gold Prices Upward
Expectations of an interest rate cut by the Federal Reserve are driving gold prices towards a second consecutive weekly increase. April’s modest rise in U.S. consumer prices has reinforced the belief in a forthcoming rate cut, anticipated for September, as inflationary pressures ease. Furthermore, flat retail sales figures for April provide further evidence supporting the likelihood of monetary policy adjustment, signaling subdued consumer demand.
Inflation and Consumer Price Trends: Insights and Analysis
In April, the consumer price index (CPI) saw a modest uptick of 0.3%, a slight decrease from the previous two months’ 0.4% increase, hinting at a potential slowdown in inflationary forces. Year-on-year, the CPI climbed by 3.4%, slightly lower than March’s 3.5% surge. Notably, housing costs and gasoline prices were significant drivers behind the CPI climb, while food prices remained stable. Core CPI, which excludes food and energy, also saw a 0.3% rise, reflecting ongoing inflationary pressures in sectors like healthcare and personal care.
Economic Indicators’ Influence on Market Sentiment: Analysis and Implications
Market expectations for a rate cut have increased, with September now showing a 73% probability, up from the previous 69%, following the latest data release. The Federal Reserve’s choice to maintain its benchmark interest rate within the current 5.25%-5.50% range highlights a prudent stance amidst conflicting economic indicators. Analysts foresee a gradual convergence of inflation towards the Fed’s 2% objective, especially amidst indications of a slowdown in the labor market.
Factors Influencing Global Demand and Supply Dynamics
Regarding demand, strong consumer demand in China’s retail sector and initiatives to steady the property market have bolstered gold prices. Nonetheless, central bank acquisitions, particularly by China’s central bank, decelerated in April due to gold prices hitting unprecedented levels.
Market Forecast: Positive Outlook Ahead
With conducive circumstances for interest rate reductions and consistent demand from pivotal markets such as China, gold prices are projected to sustain their ascent in the immediate future. Despite lingering worries about inflation, the prospect of monetary stimulus presents a bullish perspective for gold, with prices anticipated to stay elevated as traders await additional central bank interventions.
Technical Analysis
Friday sees XAU/USD recording gains, with support originating from a short-term pivot point positioned at $2354.47. The ongoing upward trend is steered by the 50-day moving average, presently at $2288.35, and reinforced by short-term swing bottom support at $2277.34. If the current upward momentum persists, attention may shift towards overcoming minor resistance levels, particularly at $2397.52, with subsequent targets including the minor top at $2497.12 and the primary top at $2431.59.
