Gold Price Analysis: XAU/USD unable to break key daily support

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  • Gold is trapped between familiar daily support and resistance on a mixed USD.
  • US CPI jumped 0.6% last month, the largest gain since August 2012.

At the time of writing, XAU/USD is trading at $1,746.92 having travelled between a low of $1,723.79 and a high of $1,749.00. 

It has been a USD story to start the week with the price falling to three-week lows on Tuesday after data showed inflation making strong gains in March.

The Consumer Price Index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February, the Labor Department said on Tuesday.

Excluding the volatile food and energy components, the CPI rose 0.3%. The so-called core CPI nudged up 0.1% in February.

There was an initial pop in the greenback before reversing course and dipping to three-week lows since the markets figured that the data would not alter the Federal Reserve’s commitment to keeping interest rates at rock-bottom levels for years to come.

US Treasury yields also fell after the data.

The next major US economic release will be the Retail Sales data for March on Thursday.

”While gold hasn’t been particularly inflation-sensitive of late, inflation risk premium can continue to fuel curve steepening, which in turn can fuel speculative outflows from precious metals complex,” analysts at TD Securities explained. 

”With massive Treasury supply still causing indigestion in rates markets, the yellow metal has struggled to benefit from rising inflation expectations,” the analysts added.

On another outlook, the analysts suggested that ”as the world is starting its exit from the covid-19 crisis, the breadth of central banks purchasing gold could potentially rise substantially considering the massive increase in sovereign debt and the rapid pace of money supply growth in reserve currency countries.”

”CTA trend followers remain positioned for further downside, and the hurdle rate for trend followers to cover their shorts is rising towards $1810/oz.”

Gold technical analysis

As per the prior analysis, Gold Price Analysis: XAU/USD is testing a critical daily support, the price is being held up at support and remains trapped between there and resistance. 

 

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