#XAUUSD @ 2,014.72 Gold price bulls stay in the market on a weaker US Dollar.
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- Gold price bulls stay in the market on a weaker US Dollar.
- Federal Reserve bets are driving the Gold price with US CPI and FOMC minutes digested.
Gold price has been drawing its strength on Wednesday from a slide in the US Dollar and benchmark US yields as signs of cooling inflation bolstered bets that a pause in US rate increases was imminent. Gold price has traveled from a low of $2,001.22 to a high of $2,028.40 following both the latest US Consumer Price Index data and the minutes from the Federal Open Market Committee´s March 21-22 meeting whereby the rate hike was widely viewed as dovish.
Firstly, the Consumer Price Index (CPI) climbed 0.1% in March after advancing 0.4% in February, compared with a forecast of 0.2% gain in a Reuters poll. But in the 12 months through March, the core CPI gained 5.6%, after rising 5.5% on the same basis in February. That core measure strips out volatile food and energy prices and was posting a month-on-month gain of 0.4%.
Nevertheless, despite a hot core reading, Fed funds futures traders are pricing in 69% probability that the Fed will raise rates by an additional 25 basis points at its May 2-3 meeting, down from around 76% before the data. This is sending the US Dollar lower on the day and into technical support and has benefitted the Gold price as higher rates to tame rising price pressures have otherwise weighed on the non-yielding asset’s appeal. Traders have positioned for one more hike in May followed by 2-to-1 bets of a pause in June.
´´While the miss on this morning’s CPI report is giving the yellow metal a lift higher, the strong labour market trends and sticky core services inflation suggest a 25bp hike at the May FOMC meeting is still in the cards,´´ analysts at TD Securities have argued.
´´However, if the market increasingly feels the May hike could be the last of the cycle, with cut timing also top of mind, it could be the catalyst needed to see gold challenge the highs yet again. With that said, CTAs could add fuel to the fire with the next upside trigger sitting at $2,064,´´ the analysts added.
As for the Federal Reserve Open Market Committee minutes, they showed that the staff at the Committee are forecasting a mild recession later in 2023.
In the prior Gold price analysis, it was stated that ´´the Gold price four-hour chart shows that the bulls are holding the fort at key support with $2,010/20 now eyed as the next major Gold price resistance area guarding $2,050. ´´
As illustrated, the price is making headway, but it is some way off still and is yet to crack the $2,020s resistance.
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