Gold Price Prediction – Prices Rise as Yields Slip Despite Robust CPI

Key Insights

• • Gold prices rebound despite strong CPI. 
  • Core inflation rose more than expected.
  • Treasury yields whipsawed, initially moving higher and then retreating.

Gold prices rebounded from a critical support level. The dollar fell against other major currencies, despite a stronger than an expected consumer price index. Benchmark yields pulled back today after initially rising following the month-over-month gains in CPI.

Inflation in the U.S. Remain Elevated

The U.S. Labor Department released April CPI on Wednesday. The report comes in the wake of last week’s rate hike by the Federal Reserve.

The headline CPI came in at 8.3%, slightly less than March but more than the 8.1% expected by economists. The report also showed that core CPI, excluding food and energy, increased by 6.2% year over year, higher than expected.

Technical Analysis

Gold prices moved higher, holding just above support near the 200-day moving average at 1,835. Resistance is seen near the 20-day moving average of 1,905. The 20-day moving average crossed below the 50-day moving average, which means a medium-term downtrend is in place.

Short-term momentum has turned positive as the Fast Stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic prints a reading of 16 below the oversold trigger level of 20.

Medium-term momentum has turned negative as the MACD generates a crossover sell signal. This occurs as the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the MACD line.

The  MACD (moving average convergence divergence) histogram has a negative trajectory that points to lower prices.