Gold Price Under Pressure as Investors Fear Rise in US Inflation

During the Asian trading session, the price of GOLD (XAU/USD) is testing the immediate resistance level of $2,040.00. Fears that a sustained increase in the US Consumer Price Index (CPI) may cause the Federal Reserve (Fed) to take a more hawkish attitude make it difficult for this precious metal to attract investors.

Futures for the S&P 500 are showing small gains in Tokyo, indicating a possible softening of the current risk-averse mood. Following the postponing of US debt ceiling discussions until Friday, the US Dollar Index (DXY) is trading flat around the 101.55 mark as investors move their focus to inflation statistics.

With US President Joe Biden eager to support the debt-ceiling rise without compromising his spending plans and Speaker McCarthy uninterested in enabling a default, it appears that a bipartisan compromise is probable. The idea is that not extending the debt ceiling could result in a default on mandatory payments, which would be disastrous.

Investors are waiting for the US economic statistics for April, specifically the headline and core inflation numbers, which are expected to climb by 0.4%. Additional rate hikes by the Fed might potentially lead to a recession, thus this increase could rekindle inflationary fears.

Gold Technical Outlook

Yesterday, GOLD prices exhibited a positive trend, reaching the $2,030.00 mark, thereby reinforcing the expected overall bullish trajectory. This trajectory is mapped within the bullish channels depicted on the chart. The initial target is to reach the $2,048.70 level, with the understanding that exceeding it will drive the price towards the subsequent major target at $2,075.25.

The 50-day exponential moving average persistently provides support to the price, thus strengthening the bullish trend projections. Nonetheless, it’s important to highlight that a drop below the $2,007.65 level would put a stop to the bullish momentum, initiating a bearish correction in the near term.