Gold price hike could run out of steam as US PCE data calls for Fed action
GOLD PRICE OUTLOOK:
- Gold prices slow to near $ 1,900 an ounce as markets await April US PCE data
- Upside surprise on key inflation gauge could fuel bets on Fed policy overhaul
- XAU / USD technical positioning warns that bullish momentum may wane
Gold prices are naturally slowing down as traders choose not to look into directional bets until the upcoming April US PCE report is released. The Fed’s preferred inflation gauge is expected to show the core year-over-year inflation rate – a measure excluding volatile items like food and energy – reached 2.9% last month.
That would mark the highest reading in nearly three decades. Additionally, US price growth data has increasingly outperformed baseline forecast (according to data from Citigroup). This suggests that analysts are underestimating the degree of reflation underway.
If this translates into an even higher PCE jump, market fears about the possibility of an earlier-than-expected withdrawal of the Fed’s stimulus measures are likely to intensify. Yields on Treasuries are expected to rise alongside the US dollar in this scenario, putting pressure on unpaid and perpetually anti-fiat gold.
GOLD TECHNICAL ANALYSIS
Gold prices are struggling to maintain their upward momentum after probing the near 61.8% Fibonacci expansion to 1912.31. A negative RSI divergence is a warning that a lower reversal may be in the cards. A return below the 50% and 38.2% levels at 1892.55 and 1872.80 may again expose the area from 1840.32 to 51.10.
Alternatively, a surge through 1912.31 could mark the 78.6% Fib at 1940.44 on the verge of defying resistance capping price since the start of the year. This is in the 1959.33-65.55 area.
Gold price table created using TradingView
GOLD TRADING RESOURCES
— Written by Ilya Spivak, Chief Strategist, APAC for DailyFX
To contact Ilya use the comments section below or @IlyaSpivak at Twitter