For the second day in a row, gold prices are trying to rally, reigniting safe haven buying momentum after falling to a 3-month low. It reached the support level of $1832 an ounce. The rebound gains took it to the $1858 per ounce level before prices settled around the $1851 per ounce level at the time of writing. Economic data results showed that the annual rate of consumer price growth in the United States of America slowed less than expected in April.
The weaker dollar and lower bond yields also contributed to the rise in the price of gold. The Dollar Index fell to 103.37 from a high of 104.11, and was hovering around 103.85 not long ago, slightly down from the previous close.
Data from the Labor Department showed that the annual rate of growth in consumer prices in the United States slowed less than expected in April. The data indicates that consumer prices in April rose 8.3% from the same month a year ago. As the annual growth rate slowed from a 40-year high of 8.5% in March, economists expected the pace of growth to slow to 8.1%. Energy prices rose 30.3% year-on-year, while food prices rose 9.4%, reflecting the largest annual increase since the period ending in April 1981.
The annual growth rate of core consumer prices, excluding food and energy prices, also slowed to 6.2% in April from 6.5% in March, although the rate should slow to 6%. On the other hand, consumer price inflation in China rose in April amid the shutdowns, while factory inflation rates fell to their lowest levels in a year. April against 7.3% in March. The inflation rate is at its highest level since German reunification and is in line with the flash estimates published on 28 April.
Gold prices fell as the dollar rose after a better-than-expected inflation report could force the Federal Reserve to introduce more tightening than initially thought. US inflation report proves Fed Chair Powell erred last week when he removed option to raise interest rates 75 basis points during the next political meeting. However, the general conclusion for most of Wall Street is that the Fed is still willing to offer back-to-back half-point rate hikes at the June and July FOMC meetings.
Gold gave up most of its gains after the inflation report, but found massive support around the $1,830 level, where the small 200-day move is. Gold was poised to show signs of stabilizing as many investors hoped for a sharper easing in price pressures, which should have paved the way for a weaker dollar and a spike as yields in the Treasury were soaring.
Gold is initially holding at $1,830 and should continue to stabilize, but that could be tested if a steady flurry of Fed talks raises market expectations for more aggressive tightening later this year.
According to the technical analysis of gold: Recent rally attempts have not removed the price of gold from the broader bearish performance trajectory as per the daily chart below. A reversal in this view may occur if the price of gold approaches the 1875 resistance levels again and the psychological high of $1900 an ounce. As I mentioned before, I always prefer to buy gold at all bearish levels, and the closest support levels for gold are currently 1838 and 1820, respectively.
The price of gold will be affected today by the level of the US dollar and the extent to which investors are willing to risk or not, as well as the course reaction to the Russian-Ukrainian war, the epidemic situation in China and the reaction to the UK growth announcement and the rest of the US inflation and US weekly jobless claims figures.