Gold prices surpassed the $2,359 mark on Tuesday following the release of data from the US Department of Labor, indicating that inflation at the factory level exceeded expectations, suggesting sustained high prices. However, this occurred alongside a decline in US Treasury yields, which presents a challenge for the US dollar.
Federal Reserve Chair Jerome Powell attracted attention in light of the Producer Price Index (PPI) release, expressing his anticipation for a continued downward trend in inflation, although he appeared less assured about the deflationary prospects compared to earlier assessments. Powell also projected a GDP growth of 2% or better, attributing it to the robust labor market.
The XAU/USD pair is trading at $2,359, marking a 0.97% increase. The US Bureau of Labor Statistics reported producer prices exceeding forecasts, with only one metric aligning with economists’ expectations. Meanwhile, US Treasury yields surged initially to reach a daily high of 4.534% before retracing later.
Daily Market Digest: Gold Shines as US Yields Decline and Dollar Softens
- Gold prices experienced a decline amidst a decrease in US Treasury yields and the strength of the US Dollar. The US 10-year Treasury note yielded 4.451%, dropping nearly 4 basis points (bps) from its opening level. Meanwhile, the US Dollar Index (DXY), tracking the Greenback against six other currencies, decreased by 0.20% to 105.00.
- According to the US Bureau of Labor Statistics (BLS), the Producer Price Index (PPI) surged by 0.5% MoM, surpassing the anticipated 0.3% rise. Likewise, the core PPI, excluding food and energy prices, also increased by 0.5%, exceeding the expected 0.2% hike. Both figures marked a significant increase from March’s decline of 0.1% in both overall and underlying inflation, indicating a notable rise in producer prices.
- April’s Consumer Price Index (CPI) is forecasted to remain unchanged compared to March’s reading at 0.4% MoM. The core CPI is expected to revert to a lower trend, decreasing from 0.4% in March to 0.3% MoM.
- Additional data releases are scheduled throughout the week, with Retail Sales on May 15, followed by Initial Jobless Claims and Industrial Production on May 16.
- The New York Federal Reserve’s monthly Survey of Consumer Expectations, released on Monday, revealed an increase in this year’s inflation expectations to 3.3% compared to 3% in March. This data followed the University of Michigan Consumer Sentiment poll, which indicated a rise in inflation expectations for a one-year outlook from 3.2% to 3.5%.
- Expectations for an interest rate cut towards the end of the year remain at 35 basis points (bps), as reported by data from the Chicago Board of Trade (CBOT).
Technical Analysis: Gold Price Surges Beyond $2,350, Bulls Set Sights on $2,400
The upward trend in Gold persisted following losses observed on Monday, yet it remains beneath the recent peak of $2,378 recorded on May 10, potentially constraining the XAU/USD within a range. Momentum, as indicated by the Relative Strength Index (RSI), favors the bulls.
Consequently, the initial resistance for XAU/USD is anticipated at the May 10 high of $2,378. Should this level be breached, the subsequent technical challenge would be the psychological barrier of $2,400, followed immediately by the April 19 high at $2,417, and ultimately the all-time high at $2,431.
Conversely, if selling pressure prevails and drives prices below $2,359, this could instigate a downward movement towards the May 9 low of $2,306, succeeded by the $2,300 threshold. Once surpassed, the next target would be the 50-day Simple Moving Average (SMA) positioned at $2,249.
