Gold Price Outlook
The price of gold may stage further attempts to test the 2022 high ($2071) as it climbs to a fresh weekly high ($1984), but fresh data print coming out of the US may lead to a pullback in bullion as the Personal Consumption Expenditure (PCE) price index is expected to show persistent inflation.
Gold price vulnerable to persistent US inflation
Recent developments in the price of gold raises the scope for a move towards the monthly high ($2010) as it clears the range bound price action from earlier this week, and the precious metal may track the positive slope in the 50-Day SMA ($1892) as the Federal Reserve appears to be on track to switch gears.
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However, the update to the US PCE, the Fed’s preferred gauge for inflation, may produce headwinds for bullion as the core rate is expected to hold steady at 4.7% per annum in February. Signs of sticky price growth may push the Federal Open Market Committee (FOMC) to pursue a more restrictive policy as inflation remains well above the central bank’s 2% target, and Chairman Jerome Powell and Co. may deliver another 25bp rate hike at the next interest rate decision on May 3 especially as ‘economic indicators have generally come in stronger than expected.’
Until then, developments coming out of the US may sway the price of gold as the FOMC anticipates that ‘some additional policy firming may be appropriate,’ but speculation for a looming change in regime may keep the precious metal afloat as the Fed appears to be at or nearing the end of its hiking-cycle.
With that said, stickiness in the core US PCE may drag on the price of gold as it puts pressure on the Fed to implement higher interest rates, but the precious metal may stage further attempts to test the 2022 high ($2071) as it bounces back ahead of last week’s low ($1934).
Gold Price Chart – XAU/USD Daily
Chart Prepared by David Song, Strategist; Gold Price on TradingView
- The price of gold is little changed from the start of the week as it bounces back ahead of last week’s low ($1934), and the precious metal may track the positive slope in the 50-Day SMA ($1892) as it clears the range bound price action carried over from last week.
- The move above the $1973 (78.6% Fibonacci retracement) to $1977 (50% Fibonacci extension) region raises the scope for run at the monthly high ($2010), with a break/close above the $2018 (61.8% Fibonacci extension) to $2020 (78.6% Fibonacci extension) area opening up the 2022 high ($2071).
- However, failure to clear the monthly high ($2010) may lead to a larger pullback in the price of gold, with a move below the $1928 (23.6% Fibonacci retracement) to $1937 (38.2% Fibonacci extension) region opening up the $1886 (23.6% Fibonacci extension) to $1987 (61.8% Fibonacci retracement) area.
--- Written by David Song, Strategist
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