Gold Price Forecast: Poised to Reach New YTD High on Soft US Inflation Data

Highlights

• Gold prices up as investors await US inflation data
• Weaker US dollar, dip in Treasury yields support gold
• Rising interest rates may hurt gold’s inflation hedge appeal

Overview

Gold prices rose on Wednesday as investors await the release of critical US inflation data that could impact interest rate decisions.

At 04:50 GMT, June Comex gold is trading $2034.30, up $15.30 or +0.76%. The XAU/USD is at $2019.09, up $14.34 or +0.72%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $186.27, up $1.16 or +0.63%.

A dip in Treasury yields and weaker US dollar is helping to support gold prices. However, rising interest rates reduce the appeal of gold, despite its reputation as an inflation hedge.

Gold prices previously broke above $2,000 following the collapse of two US regional lenders. If March’s inflation report is soft, gold prices could increase further and mark a fresh YTD high in the futures market.

The upcoming CPI data is expected to have an impact on the Fed’s inflation strategy and interest rate hikes. Economists predict a 0.2% rise in March CPI, while year-on-year headline inflation in March is predicted to be 5.2%, down from 6.0%, with core inflation likely to increase to 5.6%.

The Fed’s rate hike decisions are dependent on incoming data. But, IMF chief economist Pierre-Olivier Gourinchas warns against stopping the fight against inflation due to financial stability risks. The CME FedWatch tool indicates a 69.8% chance of a 25 basis point hike in May ahead of the release of the CPI report.

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 minor range is $1965.90 to $2049.20. The market is currently trading on the strong side of its pivot at $2007.60, making it support.

On the upside, the major upside target is the March 8, 2022 main top at $2097.20. On the downside, the key target zone is $1937.60 – $1912.20.

Daily June Comex Gold Technical Forecast

Trader reaction to $2022.80 is likely to determine the direction of the June Comex gold futures contract on Wednesday.

Bullish Scenario

A sustained move under $2022.90 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the main top at $2049.20. This is a potential trigger point for an acceleration to the upside with $2097.20 the next likely target.

Bearish Scenario

A sustained move under $2022.80 will signal the presence of sellers. If this generates enough downside momentum then look for a retest of $2007.60, followed by $1996.50. Taking out this level could trigger an acceleration to the downside with the next target $1965.80, followed by $1937.60 – $1912.20.