The price of gold continued its upward trend for the second consecutive day on Wednesday, reaching a three-week peak of $2,390. This surge came in response to data from the US Bureau of Labor Statistics indicating a slowdown in inflation, thereby raising the likelihood of a Federal Reserve rate cut in 2024. Consequently, US Treasury bond yields plummeted, and the US Dollar Index (DXY) fell to its lowest level in five weeks.
Trading at $2,384, the XAU/USD pair recorded a gain of over 1%. Despite an annual inflation rate above 3%, monthly consumer inflation figures showed a slowdown, alleviating pressure on the Federal Reserve. US Treasury yields across various maturities witnessed significant declines ranging between 8 and 10 basis points.
Additionally, other data released by the US Bureau of Labor Statistics revealed a decline in consumer spending, with April Retail Sales remaining stagnant at 0% month-on-month, falling short of the anticipated 0.4% increase.
Meanwhile, Federal Reserve officials remained in the spotlight. Minneapolis Fed President Neel Kashkari suggested that given the increased government debt, achieving 2% inflation might require higher borrowing costs in the near future. He expressed surprise at consumer spending levels and emphasized the critical question of the impact of monetary policy tightening.
Market Movers Daily Digest: Gold Shines as US Yields Drop and Rate Cut Expectations Rise
- Gold prices bolstered by declining US Treasury yields and a weakened US Dollar.
- US 10-year Treasury note yields 4.352%, dropping by 9 basis points from the opening level.
- DXY falls by 0.66% to 104.33.
- Fed Chair Jerome Powell suggests a continued decrease in inflation but expresses less certainty compared to previous statements.
- April’s Consumer Price Index (CPI) rises by 0.3% month-on-month (MoM), lower than both estimates and March’s figure.
- Core CPI increases by 0.3% MoM, meeting expectations but lower than the previous reading.
- Retail Sales miss estimates of 0.4%, recording 0% MoM, below March’s 0.6%.
- Retail Sales grow by 3% in the twelve months to April, lower than the previous 3.8% increase.
- Upcoming data includes Initial Jobless Claims and Industrial Production on May 16.
- The New York Federal Reserve’s Survey of Consumer Expectations shows an increase in inflation expectations for the year to 3.3%, up from 3% in March.
- University of Michigan Consumer Sentiment poll indicates a rise in inflation expectations for a one-year outlook from 3.2% to 3.5%.
- Interest rate cut expectations for the year’s end rise from 35 to 42 basis points, according to data from the Chicago Board of Trade.
Technical Analysis: Gold Price Surpasses May 10 High, Headed Towards $2,400
The upward trend in gold price continued for the second consecutive day, but it fell short of reaching the $2,400 mark. Breaking above $2,378, which was the high on May 10, paved the way for a new trading range between $2,380 and $2,400.
Buyers have momentum on their side, as indicated by the bullish Relative Strength Index (RSI) readings above 60, suggesting that the path of least resistance is upward.
The first hurdle for XAU/USD would be at $2,400. If this level is breached, the immediate resistance zone would be at the April 19 high of $2,417, followed by the all-time high of $2,431.
Conversely, if sellers gain control and push prices below $2,359, it could trigger a downward movement towards the May 9 low of $2,306, and then potentially down to the $2,300 mark. If this level is breached, the next support would likely be found at the 50-day Simple Moving Average (SMA) around $2,249.
