Gold holds steady

Author: Sir Amar – Technical Analyst

Gold prices are reversing some of the earlier recovery gains given the notable demand for the US dollar combined with a rebound in Treasury yields. The dollar is benefiting from risk-off flows on global recession fears as central banks tighten monetary policy to fight inflation. On the other hand, rising inflation expectations are driving yields up along the curve, increasing the exposure to unprofitable gold. Although XAU bulls manage to find some support in the gloomy outlook for the global economy after GDP downgrades by the World Bank and OECD. Traders continue to focus on Friday’s US inflation data for a new direction on XAU/USD.

This week, however, that perspective could be disrupted. In the US, May’s inflation update will cross over the Consumer Price Index (CPI). Analysts expect the value to fall 8.2% year over year. That would mean a slight slowdown in price growth since April 8th which indicates and increase up to 3%. The core component, a measure of reducing food and energy prices favored by the Federal Reserve, is expected to fall to 5.9% from 6.2%. Hotter than expected push, particularly in the core dimension, could provide some bullish momentum for the yellow metal. However, the Fed could act quickly to signal its intolerance to a higher-than-expected number as the central bank wants to prevent high expectations from becoming entrenched in the economy.

It is crucial for Gold Price to clear the $1857 hurdle to start a meaningful recovery. Gold prices are trading just below a trendline from the August 2021 low and the 61.8% Fibonacci retracement. A break above or below these levels can trigger a move up or down. However, the 50-day moving average has just broken below the 100-day moving average, which is widely viewed as a bearish cross.