As US CPI shapes views ahead of the Fed and ECB, gold price flirts with support
At the commencement of Tuesday’s trading session, the value of gold experienced a slight increase. This was due to the market’s consideration of the potential ramifications of the US Consumer Price Index (CPI) and Producer Price Index (PPI), in anticipation of the Federal Open Market Committee (FOMC) meeting scheduled for Wednesday.
This week, Treasury yields have demonstrated notable stability in anticipation of the forthcoming inflation data and monetary policy meeting. Despite the 2s 10s curve inversion being significantly negative, resting below -0.80%, equity markets appear unaffected by the bond market’s message.
Simultaneously, whilst nominal yields have reached a plateau, the US 10-year real yield is persistently increasing, currently trading above 1.5%.
The real yield refers to the nominal yield reduced by the inflation rate determined by the market value of Treasury inflation-protected securities (TIPS) for a corresponding duration. Any significant deviation of today’s CPI data from its projected value could cause fluctuations in the real yield, which may affect the price of gold. In February, when the 10-year real yield was at similar levels to its current state, gold was valued below US$ 1,850.
According to a survey conducted by Bloomberg among economists, it is predicted that the Consumer Price Index (CPI) for May will experience a month-on-month increase of 0.1%, in comparison to the previous month’s increase of 0.4%. The value of the US Dollar has slightly decreased on Tuesday, thereby assisting crude oil in recovering from its five-week low. The WTI futures contract is currently hovering around US$ 67.50 per barrel, while the Brent contract has slightly risen above US$ 72 per barrel. By cutting its 7-day reverse repo rate from 2% to 1.9%, the People’s Bank of China (PBOC) has marginally boosted financial markets. Following Wall Street’s positive closure, most APAC equities are moderately in the green with futures indicating a steady start to their cash session.
GC1(Gold front futures contract) Technical Analyses
Gold is currently in an upward trend channel that commenced in November of the previous year. The precious metal is persistently considering the possibility of breaching the lower ascending trend line of said channel.
A breach of the trend line may indicate a need for critical examination of the current bullish market trend.
The Simple Moving Average (SMA) over a period of 100 days is positioned beneath the upwardly trending line, which is located prior to the lows observed in the years between 1936 and 1945. This area has the potential to serve as a support zone.
In the event that these levels of support are breached, it is conceivable that a bearish trend may emerge. The subsequent noteworthy support range would then be located at the Double Bottom of 1811 and 1813.
Should the support levels in proximity remain intact and the price exceed the short-term 10- and 21-day SMAs, it could indicate a potential extension of bullish momentum.
In the realm of finance, the May peak of 2085 surpassed the previous March peak of 2079. However, it was unable to surpass the all-time high of 2089, resulting in a Triple Top formation that is an extension of the previously formed Double Top.
The establishment of a potential zone of resistance within the range of 20280 to 2090 has been observed. However, a sudden increase above these levels may serve as an indication of emerging bullish sentiment. The subsequent level of resistance is anticipated to be at the upper line of the ascending trend channel which presently lies in close proximity to 2185.
