Gold Prices Rise but Hit Resistance Ahead of CPI

Key Insights

• Gold prices whipsawed but moved higher
• The dollar continued to rally, weighing on Gold
• 10-year Treasury Yields hit 3-year highs
• The interest rate curve steepened

Gold prices continued to rally but hit key resistance ahead of Tuesday’s inflation report. Expectations are for CPI to rise more than 8% year over year. The 10-year Treasury yield hit highs not seen since 2018. Additionally, the dollar moved higher as the yield differential favored the greenback.

On Tuesday, the U.S. Labor Department will release March CPI. The White House gave the markets a heads up by saying the expected headline inflation to be extraordinarily high. With supply chain disruptions, elevated oil prices, and soaring food prices, the markets are likely to continue to price in accelerating rate hikes.

Technical Analysis

Gold moved higher but settled well off the session highs. Prices remain above the 10-day moving average at 1,929. Resistance is seen near the March highs at 2070. Gold prices will need to clear this level for the uptrend to be considered in place. The precious metals complex remains caught in a tight range.

Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is poised to turn positive as the MACD (moving average convergence divergence) index creates a crossover buy signal. The MACD histogram is printing in negative territory but with an upward sloping trajectory which points to consolidation.