Gold futures posted modest weekly gains, despite slowing US inflation gains and Fed optimism. The yellow metal has struggled in recent months due to the aggressive and hawkish campaign by the US central bank. Gold prices could turn to the institution’s potential decision to ease higher interest rates. The price of gold started trading this week, reaching the resistance level of 1863 countries per ounce, after registering the support of $1840 per ounce last week.
Overall, the price of gold recorded a weekly rise of around 0.7%, maintaining intact its year-to-date gains of around 1.5%. In the same performance, prices for silver, gold’s sister commodity, rose above the $22 level in late trading last week. As a result, the price of the white metal also recorded weekly support of around 2.5%, to narrow its year-to-date 2022 loss to less than 5%.
Gold and silver prices are rising after the US central bank’s favorite inflation indicator, as the PCE price index rose at a slower pace than the previous month.
According to official data, in April the Personal Consumption Expenditure (PCE) price index, the Fed’s preferred measure of inflation, rose at an annualized rate of 6.3% in April. This is down slightly from a 6.6% increase in March. On a monthly basis, the PCE price index rose 0.2% from 0.9% the previous month. The PCE core price index, which excludes the volatile food and energy sectors, rose 4.9% in April, compared with a 5.2% increase in March. The monthly core PCE price index remained unchanged at 0.3%.
Overall, this could cause the Fed to end its quantitative tightening after raising the benchmark US interest rate by 50 basis points at the FOMC meetings in June and July. This will be beneficial for gold as it is sensitive to a higher interest rate environment as it increases the opportunity cost of holding non-performing bullion.
Additionally, the price of Bitcoin rose after the US inflation report showed a continued rise in consumer prices.
Gold prices were still able to benefit from a weak Treasury market and a weaker dollar. The yield on the benchmark 10-year bond fell 3.1 basis points to 2.727%. The yield on one-year bonds fell by 0.6 basis points, while that on 30-year bonds fell by 3.6 basis points. The US dollar index (DXY), which measures the performance of the US currency against a basket of major currencies, fell 0.11% to 101.72, after opening at 101.83. Thus, the index will record a weekly loss of 1.4%. A weak dollar is beneficial for dollar-priced commodities because it makes them cheaper for foreign investors to buy.
In other metals markets, copper futures hit $4.3005 a pound. Platinum futures hit $945.60 an ounce. Palladium futures for June were unchanged at $1,955 an ounce.
According to the technical analysis of gold: So far, the price of gold is still at the start of the exit from the last descending channel. Bulls need to move towards the resistance levels of $1885 and $1900, respectively, to change the overall outlook to bullish and steady. On the other hand, the bearish momentum and stronger control of the bears will be in case it moves towards the support levels of $1838 and $1820 for the ounce, respectively. I always prefer to buy gold at all bearish levels. Gold could remain in a limited performance environment until the announcement of the US employment figures, which react strongly to the US dollar and, therefore, to the gold market.