Gold (XAU/USD) is experiencing a modest upward trend, trading at $2,356.69, down 0.06%, driven by a weaker US Dollar (USD).

Strong demand from over-the-counter (OTC) market investments, steady central bank purchases, and safe-haven flows amid geopolitical tensions in the Middle East are supporting the price.

• Gold demand up 3% in Q1 2024: The World Gold Council reports a rise to 1,238 metric tons.
• US PPI Impact: April PPI increased 2.2% year-over-year, Core PPI up 2.4%, supporting higher rates.
• CPI and Retail Sales Outlook: April CPI expected to ease to 3.4%, Retail Sales projected at 0.4% MoM.

Fed’s Hawkish Stance

However, the potential for downward pressure exists due to hawkish comments from Federal Reserve (Fed) officials. Fed Chairman Jerome Powell’s suggestion to maintain higher interest rates for a prolonged period could negatively impact gold in the near term.

Upcoming Economic Data Releases

Later today, the US Consumer Price Index (CPI) for April will be released, offering insights into the Fed’s potential rate adjustments.

Additionally, April Retail Sales data will provide a look into consumer spending trends. Hotter-than-expected inflation data could lead to a more aggressive Fed stance, strengthening the USD and potentially pressuring gold prices.

US Producer Price Index Impact

The US Producer Price Index (PPI) increased by 2.2% year-over-year in April, compared to a 1.8% rise in March, matching expectations. Core PPI also increased by 2.4% year-over-year, up from 2.1% in March.

On a monthly basis, both PPI and Core PPI rose by 0.5% in April. Fed Chair Powell noted the slower-than-expected decrease in inflation, justifying the need to maintain higher rates for longer.

However, he indicated that further rate hikes might not be necessary. Kansas City Fed President Jeffrey Schmid echoed these sentiments, highlighting that inflation remains high, necessitating continued efforts by the US central bank.

Consumer Price Index and Retail Sales Outlook

The annual headline CPI inflation is expected to ease to 3.4% in April from 3.5% in the previous estimates, while Core CPI inflation is projected to drop to 3.6% from 3.8% in March.

US Retail Sales are expected to decline to 0.4% month-over-month in April from 0.7% in the preliminary reading. According to the CME’s FedWatch Tool, financial markets are pricing in nearly 65% odds of a Fed rate cut by September 2024.

Global Gold Demand Trends

Global gold demand rose by 3% to 1,238 metric tons, marking the strongest first quarter since 2016, according to the World Gold Council’s Q1 2024 report. This increase underscores the continuing appeal of gold as a safe-haven asset.

Gold Prices Forecast