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Gold Analysis: Bulls Await Further Cues

  • Gold prices are consolidating near $2360 an ounce as investors turn their attention to US inflation reports due this week.
  • The markets are seeking further insights into the Federal Reserve's monetary policy path amid mixed signals from Fed officials.
  • The Consumer Price Index (CPI) is scheduled to be released today, Wednesday.
  • Following the weaker-than-expected US April jobs report and last week's dismal job openings report, expectations for US rate cuts this year have increased.

Gold Analysis Today 15/5: Bulls Await Further Cues (graph)

The market expects that the US Federal Reserve will likely cut interest rates twice this year and will begin easing them in September. Elsewhere, the share of gold in India's foreign reserves rose to 8.15% at the end of March, according to the country's central bank. On the other hand, the worsening geopolitical conflict in the Middle East continues to enhance the appeal of a safe haven.

According to gold trading platforms, gold futures fell at the start of the trading week and suffered their worst one-day drop in a month as financial markets brace for critical US inflation data this week. With inflation concerns lingering, Fed officials are considering raising rates for an extended period, which could weigh on the yellow metal.

In general, gold prices have increased by more than 13% since the beginning of the year until now. Silver prices, gold's sister commodity, were little changed to start the trading week. Overall, the price of the white metal has advanced by approximately 19% since the beginning of the year until now.

In general, while US Federal Reserve Chairman Jerome Powell ignored the possibility of raising interest rates in the future, a group of monetary policy makers suggested that raising interest rates should not be taken off the table. Meanwhile, the US central bank's basic expectation appears to be to raise interest rates in the long term to combat inflation. Investors believe that the US central bank will cut interest rates twice starting in September. Nonetheless, next month's updated Summary of Economic Projections (SEP) from the Fed should offer some insight into what officials are thinking.

Meanwhile, on the economic data front, the New York Fed's forecast for one-year consumer price inflation rose to 3.3% in April, up from 3% for the past four months in a row. Consumers expect prices for almost everything to rise, whether it's gasoline, medical care, or housing.

Factors affecting the gold market

The dollar index (DXY), a gauge of the US dollar against a basket of other major currencies, fell to 105.22 from an opening high of 105.31. The index is up about 4% since the beginning of the year. Generally, a weaker dollar is supportive of dollar-priced commodities because it makes them cheaper for foreign investors to buy. Another factor, US Treasury yields fell across the board, with the 10-year yield down 3.1 basis points to 4.473%. Additionally,  the 2-year yield fell 1.9 basis points to 4.849%, while the 30-year yield fell 3.3 basis points to 4.613%. Gold is sensitive to interest rate movements because it affects the opportunity cost of holding the non-yielding bullion.

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    Gold Price Forecast and Analysis Today:

    According to the performance on the daily chart above, the price of gold is still on its upward trajectory. Technically, the movement of the bulls towards the resistance level of $2375 will stimulate the move towards the psychological resistance of $2400 consecutively. Furthermore, this could happen if the U.S. inflation readings come in lower than expected and global geopolitical tensions increase, which would encourage more gold buying. Overall, I still prefer buying gold at every level.

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    Mahmoud Abdallah
    About Mahmoud Abdallah
    Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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