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Gold Price Forecast: Gains Capped with Inflation Data to Determine Fed’s May Policy Decision

By:
James Hyerczyk
Updated: Apr 11, 2023, 08:20 GMT+00:00

Below average volume and volatility ahead of Wednesday's consumer inflation data and Fed meeting minutes.

Comex Gold

In this article:

Highlights

  • U.S. hiring  strong enough to boost chances of May rate hike
  • Economic data releases and Fed meeting minutes awaited
  • Inflation outlook and CPI data to determine interest rate path

Overview

Gold prices edged higher on Tuesday after falling over 1% in the previous session, as Treasury yields drifted lower and the U.S. Dollar eased ahead of key U.S. consumer inflation data on Wednesday.

At 06:50 GMT, June Comex gold futures are trading $2014.50, up $10.70 or +0.53%. The XAU/USD is at $1999.35, up $6.88 or +0.35%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $185.11, down $1.38 or -0.74%.

Lower U.S. Treasury Yields Underpin Gold

The 10-year U.S. Treasury yield is slightly lower on Tuesday after rising the previous session in response to Friday’s U.S. Non-Farm Payrolls report that came out in line with expectations of 236,000, but down from 326,000 new hires in February.

Although the report indicated hiring is slowing, it was strong enough to boost the chances of a 25-basis point rate hike by the Federal Reserve in May. This was enough to drive up yields and demand for the U.S. Dollar, while pressuring dollar-denominated and interest rate sensitive gold.

Gold Investors Await Key Economic Data

Traders are anticipating the release of key economic data later in the week, including inflation data, retail sales, and industrial production reports, as well as the latest Federal Reserve meeting minutes.

Investors are focusing on the inflation outlook and are waiting for the consumer price index data to be released on Wednesday, which could provide clarity on the future interest rate path for the Federal Reserve’s May policy meeting.

If the inflation data is higher than expected, there is a chance that interest rates could be raised again in May. Gold prices could be capped by the possibility of another Federal Reserve interest rate hike.

Daily June Comex Gold

Daily June Comex Gold Technical Analysis

The main trend is up according to the daily swing chart. A trade through $2049.20 will signal a resumption of the uptrend. A move through $1965.90 will change the main trend to down.

The minor range is $1965.90 – $2049.20. The market is currently straddling its pivot at $2007.60.

The short-term range is $1830.20 to $2049.20. If the trend changes to down then its retracement zone at $1937.60 – $1912.20 will become the primary downside target.

Daily June Comex Gold Technical Forecast

Trader reaction to the minor 50% level at $2007.60 is likely to determine the direction of the June Comex gold futures market on Tuesday.

Bullish Scenario

A sustained move over $2007.60 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the market to make a run at $2049.20.

Bearish Scenario

A sustained move under $2007.60 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at $1965.90.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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