Will Gold Prices Skyrocket to $5,000 as Inflation Hits Three-Year Highs?
Gold spot holds tightly at $4,532.21 with a tiny 0.01% move as macro conditions remain messy. The precious metal continues to move inside...
Quick overview
- Gold spot price remains stable at $4,532.21, reflecting a 0.01% change amid complex macroeconomic conditions.
- Sticky inflation and a fragile U.S.-Iran ceasefire provide support for gold, while central bank buying, particularly from China, helps prevent further downside.
- Technical analysis shows bullish patterns with critical resistance levels identified at $4,543 and $4,546, while key support is noted at $4,512.
- A potential breakout setup is forming, with a buy stop order recommended above $4,540 and targets set at $4,546 and $4,571.
Gold spot holds tightly at $4,532.21 with a tiny 0.01% move as macro conditions remain messy. The precious metal continues to move inside a parallel declining channel in which the geopolitical risk premium eases while a pivot back to the hawkish camp in central bank expectations occurs after the more hot economic data.
Gold is a beneficiary of the following:
- More sticky inflation: The headline U.S. April CPI print came in 3.8% year over year (y/y), highest in three years, and the rate-cut call for under U.S. President Fed Chairman Kevin Warsh in the near term was downgraded. This resulted in higher real rates, which would put more pressure on precious metals.
- Ceasefire uncertainty: The fragile U.S.-Iran ceasefire has been in place for over 5 weeks with Iranian oil and gas shipments through the Strait of Hormuz returning to the market in a gradual manner although normalization is not yet complete. This keeps a firm safe-haven floor under bullion.
- Gold buying by central banks: Central bank gold buying is a big bottom under the precious metal with the gold purchase record of the PBOC in the People’s Bank of China (PBOC) at 17 months straight in this cycle preventing more downside than otherwise.
Gold Chart Pattern Analysis
The two-hour chart of the precious metal displays highly bullish price structure. Gold has made bullish hammers after the last test of the $4,512 level and the 0.5 Fibonacci retracement level as well as the channel midline.
The red moving average offers resistance to upside movement from $4,543 to $4,546. However, it is notable that higher lows have been made since late March and the relative strength index is at 51 and neutral with bullish divergence, signaling a lack of sellers.
- Critical Resistance: $4,543, $4,546, and the structural swing high at $4,571.
- Key Support: $4,512 (0.5 Fib), $4,498 (0.618 Fib), and major demand at $4,480.
Trade Idea
A high-probability breakout setup is forming on the shorter timeframes.
- Order: Buy Stop execution above $4,540
- Targets: $4,546 (T1) and $4,571 (T2)
- Stop Loss: Placed safely below the recent cluster support at $4,512
Conclusion
Right now, gold is in a transition or consolidation mode, setting up for another micro-trend. Even though de-escalation in the Middle East has removed the current safe haven impetus, structural accumulation from institutions and strong demand for inflation hedging keeps the multi-month bull trend going strong. Expect short-term retracements to continue to be bought into as major banks maintain $5,000+ price targets. Watch retail sales figures and Fed remarks in the coming days.
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