Gold prices extended their upward trajectory for the second consecutive day on Wednesday, reaching a three-week high of $2,390. The surge came after data released by the US Bureau of Labor Statistics (BLS) indicated a slowdown in inflation, increasing the likelihood of a Federal Reserve (Fed) rate cut in 2024. Consequently, US Treasury bond yields plummeted, while the US Dollar Index (DXY) fell to a five-week low.
READL: GOLD PORTRAYING BULLISH SENTINEMENT
The XAU/USD pair traded at $2,384, marking a gain of over 1%. Despite annual consumer inflation standing above 3%, monthly figures showed a slowdown, alleviating pressure on the Fed. US Treasury yields across short and long maturities declined by 8 to 10 basis points in response.
In addition to inflation data, other economic indicators released by the US BLS pointed to a deterioration in consumer spending. Retail Sales in April remained unchanged at 0% month-on-month, falling short of estimates of a 0.4% increase.
Meanwhile, statements from Fed officials continued to make headlines. Neel Kashkari, President of the Minneapolis Fed, remarked that given higher government debt, achieving 2% inflation might require higher borrowing costs in the near term. He expressed surprise at consumer spending levels and emphasized the importance of assessing the restrictiveness of monetary policy moving forward.
The confluence of factors, including inflation data, consumer spending figures, and commentary from Fed officials, has contributed to heightened market volatility and speculation regarding future monetary policy decisions. Investors are closely monitoring developments for insights into potential shifts in market dynamics and their implications for gold prices and other financial assets.
GOLD PRICE TECHNICAL ANALYSIS: POTENTIAL UPSIDE MOMENTUM TOWARDS $2,400
Gold price’s recent rally has extended for the second consecutive day, inching closer to the $2,400 mark. Although buyers fell short of breaching this psychological level, surpassing the May 10 high of $2,378 has paved the way for a new trading range within the $2,380 to $2,400 range.
The momentum in favor of buyers is evident as the Relative Strength Index (RSI) remains bullish, with readings above 60. This suggests that the path of least resistance for gold is upward.
In terms of resistance levels, the first hurdle for XAU/USD would be at $2,400. Upon surpassing this level, the immediate supply zone would be the April 19 high at $2,417, followed by the all-time high at $2,431.
Conversely, if sellers gain momentum and push prices below $2,359, it could trigger a downward move towards the May 9 low of $2,306, followed by the $2,300 level. Further downside could lead to a test of the 50-day Simple Moving Average (SMA) at $2,249.
As gold price continues its upward momentum, traders are closely monitoring key levels and indicators for potential entry and exit points, considering both bullish and bearish scenarios.
