The price of gold is unchanged at around $1,960 early Tuesday, lacking a distinct directional bias.
In a positive market environment, the US dollar declines along with US Treasury bond yields.
The United States Dollar’s (USD) poor performance. Along with rising market sentiment and declining Treasury. Bond yields, is helping to underpin the price of gold. Prior to the US Federal Reserve (Fed) policy statements on Wednesday. Investors are keenly awaiting the important US Consumer Price Index (CPI) data scheduled for release on Tuesday.
Data from the US Consumer Price Index will increase volatility. So far this Tuesday. The dollar has remained on the defensive. Weighed down by risk trades seen on Wall Street indices overnight. Investors are cheering forecasts. That the Federal Reserve’s monetary policy tightening is coming to a stop. With the US Consumer Price Index data expected to be lower than the previous month’s readings.
Based on recent US Consumer Price Index data, the price of gold may test its 100 DMA once again
The main annual CPI figure is expected to rise 4.2% in May, down from 4.9% in April. The Core CPI statistic. Which excludes volatile food and energy costs, is predicted to rise 5.6%,. Slightly faster than the 5.5% increase in April. The monthly Consumer Price Index is expected to gain 0.3% in May after rising 0.4%. In the previous month. Nonetheless, the core CPI is predicted to rise at the same 0.4% rate as the previous month.
Softer-than-expected US CPI data is anticipated to trigger a further decline in the US Dollar, implying that more Fed tightening is off the table later this year, following the pause in rate hikes in June. The Fed’s dovish outlook may excite gold bulls, propelling them back towards the $2,000 mark. In contrast, the above predicted prints, particularly the core monthly CPI figure, will re-establish expectations for rate hikes when the Fed decides to skip this week. Markets are currently pricing an 81.5% chance of a Fed rate hike pause on Wednesday, while rate hike bets for the July FOMC meeting are approximately 60%.
Having stated that, The US CPI inflation report is crucial in predicting the Fed’s next policy decision and, as a result, the US Dollar values. As a result, the gold price will continue at the mercy of US Dollar dynamics and the performance of US Treasury bond yields on significant US data releases.
Among other variables influencing gold prices, the People’s Bank of China (PBOC) reduced its seven-day Reverse Repo Rate from 2.0% to 1.90% in an effort to boost the country’s decreasing economic growth. The PBOC rate decrease news had little market impact, as traders avoided placing new bets ahead of the US CPI inflation data and the impending Fed event.
Gold Technical analysis
As shown on the daily chart. Gold vendors are still present at the bearish 21-Daily Moving Average (DMA) is currently at $1,961. It’s worth noting that the gold price hasn’t closed above the latter since May 15.
If the 21 DMA remains a tough nut to crack, gold prices may extend their recent downward trend to test the previous day’s low of $1,949.
The horizontal 100 DMA at $1,942 is the next key support level. A daily close below the latter will drive a new slump towards the round figure of $1,930.
The 14-day Relative Strength Index (RSI) is barely below the midpoint, favoring gold bears as we approach the big event risks from the US.
On the other hand, acceptance above the 21 DMA threshold is required on a daily closing basis in order to attempt new headways. towards the flat 50 DMA of $1,990.
Prior to that, the Friday high of $1,973 and the June 2 high of $1,983 will be tested.
