Gold Price Forecast: Higher on Bets Fed Hiking Cycle May End Soon

Highlights

• Gold Prices Rise for Third Day on Weaker US Inflation Data
• Fed Hiking Cycle May End Soon, Boosting Gold Prices
• Fed may pause rate hikes after May 3 meeting

Overview

Gold futures are edging higher on Thursday, but inside yesterday’s trading range. The price action suggests investor indecision and impending volatility. Traders are currently thinking about two possible scenarios for the Federal Reserve’s response to Wednesday’s US CPI report. The first scenario is that the Fed will increase rates by 25 basis points at their May 3 meeting and then stop raising rates further. The second scenario is that the Fed will raise rates and suggest that they will need to raise rates again in June.

At 07:30 GMT, June Comex gold futures are trading $2036.50, up $11.50 or +0.57%. The XAU/USD is at $2022.75, up $4.47 or +0.22%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $187.18, up $0.90 or +0.48%.

Gold Prices Rise on Weaker US Inflation Data and Predicted Fed Rate Hike Pause

Gold prices increased for the third consecutive day due to weaker-than-expected US inflation data. The US Consumer Price Index (CPI) rose by only 0.1% in March, below the expected increase of 0.2%, which led traders to believe that the Federal Reserve may only increase interest rates once more before pausing.

Economists predict that the Federal Reserve will raise interest rates once more in May before pausing its tightening campaign in June. The US CPI data suggests that the Fed’s hiking cycle may be ending soon also, leading to lower Treasury yields and a weaker dollar, supporting gold prices.

San Francisco Fed Bank President Mary Daly stated that tighter credit conditions could suggest the need for a pause in rate hikes. Richmond Fed President Thomas Barkin said that the Fed still needs to work on bringing inflation down to its 2% target. The recent worries about recession have led to an increase in gold prices as it is seen as a safe-haven asset.

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 $1996.50 will change the main trend to down.

The nearest support is a minor pivot at $2007.60. The closest resistance is 2049.20, followed by the March 8, 2022 main top at $2097.20.

Daily June Comex Gold Technical Forecast

Trader reaction to $2029.80 is likely to determine the direction of the June Comex gold futures contract on Thursday.

Bullish Scenario

A sustained move over $2029.80 will indicate the presence of buyers. This could trigger an intraday surge into $2049.20. Taking out this level will reaffirm the uptrend. There is no resistance until $2097.20.

Bearish Scenario

A sustained move under $2029.80 will signal the presence of sellers. This could trigger a sharp break into the pivot at $2007.60, which is the last potential support before the main bottom at $1996.50.