Market Overview
Gold (XAU/USD) surged to $2,397 on Thursday fueled by a declining US dollar (USD), but signs of a weakening uptrend suggest an impending bearish correction. The latest Consumer Price Index (CPI) report for April revealed a deceleration in US inflation, heightening speculation of potential Federal Reserve (Fed) rate cuts in the coming months. The prospect of lower interest rates is viewed as favorable for gold as it lowers the expense associated with holding the precious metal.
Influence of US Economic Data on Market Dynamics
Gold traders will be attentive to US Building Permits, Housing Starts, Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production on Thursday.
Furthermore, speeches from Fed officials Barr, Harker, Mester, and Bostic are expected. While there’s a possibility of hawkish remarks bolstering the USD, which may limit gold’s upward movement, the prevailing sentiment remains favorable for gold.
Impact of Inflation and Retail Sales Data on Market Trends
In April, the annual increase in the US Consumer Price Index (CPI) was 3.4%, slightly lower than March’s 3.5%. The monthly CPI uptick was 0.3%, falling short of the anticipated 0.4%.
The Core CPI, which excludes food and energy, saw a year-over-year rise of 3.6% in April, marking a slight decrease from March’s 3.8%. Retail sales remained unchanged in April after a 0.6% increase in March, failing to meet the projected 0.4% growth.
Central Banks Drive Increased Demand for Gold
The World Gold Council’s Q1 2024 report reveals a 3% rise in global gold demand to 1,238 tonnes, marking the most robust first quarter since 2016. Notably, central banks, such as the People’s Bank of China, are augmenting their gold reserves while decreasing investments in US Treasury securities.
Julius Baer pointed out that this strategic move, primarily motivated by political factors, sustains consistently high gold prices without necessarily causing further escalation.
Forecasting Gold Prices: Trends and Projections
Gold (XAU/USD) is currently priced at $2392.795, showing a modest increase of 0.13%. Significant price thresholds to monitor encompass a pivot point established at $2383.79. Immediate resistance tiers are situated at $2398.70, $2414.06, and $2431.46, while immediate support levels are identified at $2372.33, $2354.71, and $2334.83.
Technical analyses present a mixed picture. The 50-day Exponential Moving Average (EMA) stands at $2348.56, and the 200-day EMA registers at $2307.93, indicating a bullish trajectory above these benchmarks. However, the formation of a double top pattern near the $2398 mark suggests the potential for bearish sentiment.
In summary, the outlook for gold leans towards bearish territory below the $2398 threshold. A breach above this level could instigate bullish momentum, whereas a drop below the pivot point at $2383.79 might trigger a bearish correction towards $2373.
