After two days of rises, the gold price has entered a phase of stabilization near $2,030 early Wednesday. The US Dollar (USD) is retreating from multi-day highs. Halting its rebound momentum ahead of the all-important US Consumer Price Index (CPI) data coming later in American trade on Wednesday.
The XAU price is determined by the US Consumer Price Index.
Wednesday’s crucial US Consumer Price Index (CPI) data is likely to set the tone for markets in the coming week. As it will shed new light on the US Federal Reserve’s (Fed) interest rate outlook. Particularly after the Fed stated at its April meeting that it will remain data-dependent in determining the extent of future rate hikes. Last Friday’s surprise Nonfarm Payrolls statistics from the United States aided the US Dollar’s sluggish rebound.
However, the small reprieve for US Dollar bulls is likely to fade if US CPI data is worse than predicted. Annualized, the US Consumer Price Index is predicted to rise 5.0% in April, while the Core CPI. Which excludes volatile food and energy costs, is expected to rise 5.5%, compared to a 5.6% increase in March. The main Consumer Price Index is expected to grow 0.4% in April. Compared to a 0.1% increase in March. The Core CPI, on the other hand, is expected to have gained 0.4% in the reporting period.
Any shortfall in headline or core CPI numbers will accelerate the Federal Reserve’s rate cuts. expectations as early as July. Causing the gold price to rise again at the expense of the US dollar and US Treasury bond rates.
Only a larger-than-expected increase in the CPI report may derail market expectations of a Fed rate decrease in the second half of this year. Allowing the US dollar to resume its recovery. In such a circumstance, gold might see another corrective move below towards $2,000 per ounce.
The United States’ debt ceiling problems may support the gold price.
Rising default worries in the United States appear to be weighing on the US Dollar at the present. Following the much-anticipated meeting at the White House between US President Joe Biden, Republican House Speaker Kevin McCarthy. And other congressional leaders. Late Tuesday, no agreement was reached to raise the $31.4 trillion US debt ceiling.
According to Reuters, US President Joe Biden declared the discussion “productive,” and House Speaker Kevin McCarthy stated at the meeting that the US will not default on its debt.
According to the Bipartisan Policy Centre. The “US debt limit default will occur between early June and early August, depending on revenue strength.”
As a result, the gold price may continue to benefit from US default threats. Which may balance any negative impact from US inflation trends.
Gold Technical Outlook
With the bullish wedge formation in place, the short-term upside bias in gold price remains strong, especially with the 14-day Relative Strength Index (RSI) firmly above the midline.
A weaker-than-expected US Consumer Price Index reading might offer more legs to the gold price this week, with buyers trying to attack the $2,050 mark once more. Acceptance over the latter opens the door to record highs of $2,080.
A surprise greater US CPI data, on the other hand, might re-fuel the gold price drop, putting the modestly bullish 21-Daily Moving Average (DMA), presently at $2,008, at risk.
The next psychological level of support aligns at $2,000, below which the static support at $1,977 might be tested.
