Gold prices headed lower on Thursday as the US dollar strengthened on the back of forecast-beating inflation data. Spot gold traded at $2330 per ounce after going down by 0.15%. On the other hand, futures gold was lower by 0.05% and traded at $2349 at the time of writing. The precious metal has been engaged in a tug of war since mid-February and buyers will likely tame their appetite in intraday trading on Wednesday as they wait for more US data.
The headline US inflation came in at 0.4% in March, against an expected figure of 0.3%. The annualized figure stood at 3.5%, exceeding the forecast figure of 3.4%. Meanwhile, the core CPI (excluding food and energy) was at 0.4% month-on-month, once again beating the forecast figure of 0.3%. These figures have catalyzed a substantial decline in expectations of a June interest rate cut. As of this writing, odds of a June rate cut have declined to under 10%, as per the CME FedWatch Tool.
Gold also faces pressure from US Treasury bonds, which have risen beyond 4.500% on the benchmark 10-year and 5-year bonds. Nonetheless, the outlook for safe haven gold purchases remains positive, as geopolitical tensions in the Middle East haven’t cooled down. Iran leader Ayatollah Ali Khamenei stated on Wednesday that Israel’s attack on its Syrian consulate was akin to attacking Iranian territory, and vowed retaliation. Meanwhile, US President Joe Biden has assured Israel of “ironclad” support against Iranian attacks.
Looking ahead, XAUUSD will get fresh impetus from US Producer Price Index (PPI) and Initial Jobless Claims data, which will be out later on Thursday.
Technical analysis
The momentum on gold price favours further advances to the upside, but that will be based on buyers’ ability to keep the price above 2346. Doing so could see them break above the resistance at 2355, and possibly test 2365 in extension. Alternatively, XAUUSD will likely head lower if the sellers pull down the price below 2346. That could propel them to breach the support at 2334 and potentially test 2324 in extension.
