Forex News

Gold price eyes fresh record high amid softer US inflation and dollar

Published by
Nonhlanhla P Dube
  • Gold prices have reached levels not seen since March 2022 and investors are watching for clues to extend the current bullish run towards the all-time high of $2,075 achieved in 2020.
  • The latest surge in gold prices can be attributed to a weaker US Dollar, downbeat US inflation data, and talks of the Federal Reserve (Fed) policy pivot, which have all provided support to the precious metal. Additionally, recession concerns and positive news from China, one of the world’s largest XAU/USD consumers, have also bolstered the upward trend.
  • The Gold price is likely to remain firm amid a light economic calendar during the early part of the day. However, US Retail Sales for March, the preliminary readings of the US Michigan Consumer Sentiment Index (CSI), and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations are all important indicators to watch for clear directions. The Gold price may quickly rise to the all-time high and surpass the $2,075 key hurdle if the scheduled data prints downbeat figures.

Gold price (XAU/USD) continues to climb higher, reaching levels not seen since March 2022 and is now hovering around $2,040 in Asia. Investors are now watching for clues to extend the current bullish run towards the all-time high of $2,075 achieved in 2020.

The latest surge in gold prices can be attributed to a weaker US Dollar, downbeat US inflation data, and talks of the Federal Reserve (Fed) policy pivot, which have all provided support to the precious metal. Additionally, recession concerns and positive news from China, one of the world’s largest XAU/USD consumers, have also bolstered the upward trend. Slower inflation data has boosted the gold price as it rules out the need for higher Federal Reserve rates, leading to a decline in the US Dollar.

On Thursday, the US Producer Price Index (PPI) for March dropped to a four-month low of -0.5% MoM, lower than the expected 0.0%. Similarly, PPI YoY declined to 2.7% from 4.9% previously, against the forecast of 3.0%. The Consumer Price Index (CPI) also fell to its lowest level since May 2021, registering 5.0% YoY in March compared to 6.0% in February, and against the anticipated 5.2%. However, the annual Core CPI improved to 5.6% YoY in March, matching market forecasts and exceeding the 5.5% in February.

The Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting have also signaled a reduction in the expectations for rate hikes due to turmoil in the banking sector. While the Minutes did not offer any new information, it cast doubt on the hawkish Fed moves, aside from the expected 0.25% rate hike in May.

Moreover, statements from the International Monetary Fund (IMF) and the World Bank (WB) spring gathering of global central bank officials suggest that the West may be headed towards recession, weighing on the US Dollar and pushing up the Gold price. Also, there are hopes of economic recovery in Asia and the moves by Russia, China, and Brazil to destabilize the US Dollar’s reserve currency status have exerted downside pressure on the DXY, pleasing XAU/USD buyers.

China and India are two of the world’s biggest Gold consumers, and hopes of a faster economic recovery in these countries have contributed to the XAU/USD’s upward trend. The IMF has predicted that India will be the global economic growth engine, with New Delhi and Beijing contributing to 50% of world economic growth.

The Gold price is likely to remain firm amid a light economic calendar during the early part of the day. However, US Retail Sales for March, the preliminary readings of the US Michigan Consumer Sentiment Index (CSI), and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations are all important indicators to watch for clear directions. The Gold price may quickly rise to the all-time high and surpass the $2,075 key hurdle if the scheduled data prints downbeat figures.

Gold price technical analysis shows that the gold price remains at a 13-month high and is currently testing the 11-week-old ascending resistance line amid overbought conditions of the Relative Strength Index (RSI) line. This, together with impressive bullish signals from the Moving Average Convergence and Divergence (MACD) indicator, suggests a pullback in the Gold price. A convergence of a fortnight-long ascending trend line and the 10-day moving average (DMA), around $2,003 at the latest, could be the next support levels to watch out for.

Table 1: US Producer Price Index (PPI)

March 2022Expected
PPI MoM-0.5%0.0%
PPI YoY2.7%3.0%
This table shows the recent trend in gold prices and how they are affected by key economic indicators such as the US Dollar, inflation data, and Federal Reserve policy.

Table 2: US Consumer Price Index (CPI)

March 2022February 2022Expected
CPI YoY5.0%6.0%5.2%
Core CPI YoY5.6%5.5%5.6%
This table provides a technical analysis of the gold price trend, including support and resistance levels, Relative Strength Index (RSI), and Moving Average Convergence and Divergence (MACD) indicators.

Table 3: Technical Analysis of Gold Price

Price
Current Price$2,040
All-time High$2,075
Support Level 1$2,003
The technical analysis includes the current gold price, the all-time high, and the support level to watch out for.
Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at nonhlanhla@rateweb.co.za

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Published by
Nonhlanhla P Dube
Tags: XAU/USD

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