Gold has entered a phase of upside consolidation above the $4,700 level on Tuesday, having reached its highest levels in three weeks at around $4,775 in the early Asian hours. Gold bulls now await the US Consumer Price Index (CPI) data for the next push higher.
Gold: All eyes on the key US CPI inflation data
The latest leg down in Gold could be attributed to a bout of profit-taking after two back-to-back days of gains and ahead of the critical US inflation release.
Traders resort to repositioning amid receding hopes of a peace deal likely to be reached between the United States (US) and Iran before the highly anticipated meeting between US President Donald Trump and his Chinese counterpart Xi Jinping, scheduled later this week.
On the geopolitical front, there are no signs of progress on US-Iran peace talks. Trump said the ceasefire with Iran was “on life support”.
Meanwhile, CNN News reported, citing sources familiar with the discussions, that the US President is seriously weighing resuming combat operations as he is growing increasingly frustrated with how the Iranians are handling talks to end the conflict.
Prior to this report, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned Iran’s armed forces remained on high alert and capable of responding decisively to any aggression.
The US-Iran standoff has sent Oil prices back higher; reviving inflation concerns and boosting hawkish expectations about the US Federal Reserve’s (Fed) interest rate outlook. This, in turn, appears to be checking the upside for the non-interest-bearing bright metal.
Hence, all eyes now turn to the US CPI report, which could alter market expectations about the Fed’s next rate moves and decide the next big trend in Gold.
The US annual and monthly core CPI are expected to rise by 2.7% and 0.4% in April. These figures are closely monitored by the Fed as they exclude volatile items like energy and food, while also shielding the war impact on energy prices.
Hotter-than-expected core CPI readings could reinforce hawkish bets surrounding the Fed, lifting the US Dollar at the expense of Gold. On the contrary, Gold could receive the much-needed boost to extend the recent breakout on an unexpected slowdown in US inflation. A softer print could revive Fed rate cut bets for this year, rendering negative for the Greenback.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,730.82. The metal sits just under the 50-day Simple Moving Average (SMA) at $4,757.65 and the 100-day SMA at $4,785.99, leaving the broader tone capped even as it holds above the 21-day SMA at $4,696.77 and the 200-day SMA at $4,328.17. Price action is effectively testing the descending resistance trend line, while the Relative Strength Index (14) near 53 hints at mildly positive but not impulsive momentum, suggesting a consolidative bias rather than a clear directional break.
On the topside, immediate resistance is seen at the 50-day SMA around $4,757.65, followed by the 100-day SMA near $4,785.99, with further upside likely constrained along the extension of the downward resistance trend line. A daily candlestick closing above the confluence zone of resistances around $4,775 is critical to resuming the upside break from the falling wedge pattern, confirmed on May 6.
However, Gold could test bearish committments at higher levels amid a Bear Cross. The 50-day SMA closed below the 100-day SMA on Monday, validating a beairsh crossover and acting as a headwind to the recent rally in Gold.
On the downside, initial support is provided by the nearby pivot area around the latest close and the 21-day SMA at about $4,696.77; a daily close below this short-term average would expose deeper retracement towards the more distant 200-day SMA around $4,328.17.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Consumer Price Index ex Food & Energy (MoM)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM print compares the prices of goods in the reference month to the previous month.The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
