Gold futures rose after the annual inflation rate in the United States continued to decline, which made financial markets expect the Federal Reserve to leave US interest rates unchanged on Wednesday. The price of the yellow metal was gradually gaining momentum, especially with the weakness of the US dollar.
XAU/USD gold price rose towards the $1971 resistance level, then returned to the downside strongly amid profit-taking sales that pushed it towards the $1940 support level and settled around $1948 an ounce at the time of writing. Gold prices stabilized this week, but they are still higher by more than 8% since the beginning of the year 2023. In the same performance, silver prices, gold’s sister commodity, continued to rise above the $24 resistance level. In general, the price of the white metal increased by more than 2% in the past week, and became positive in the year, with an increase of 0.33% since the beginning of the year 2023 to date.
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On the economic side, according to the Bureau of Labor Statistics (BLS), the annual inflation rate in the United States slowed to 4% in May, down from 4.9% in April. This also came in below the market estimate of 4.1%. The Consumer Price Index (CPI) increased by 0.1% on a monthly basis. Core CPI fell to 5.3% year over year, down from 5.5% in April. Core inflation, which removes the volatility of the food and energy components, rose 0.4% for the sixth consecutive month on a month-on-month basis.
Services inflation remained near a 40-year high but slowed to 6.3%.
Major stock market indices were subdued in early morning trading as investors may have set another lower reading for the US Consumer Price Index. In addition, a lower-than-expected headline CPI figure is likely to force the Federal Reserve to hit the interest rate pause button.
The US central bank futures market starts leaving the federal funds rate unchanged at the range of 5.00% and 5.25%. Accordingly, US Treasury yields fell on Tuesday, with the benchmark yield for ten-year bonds dropping nearly five basis points, to close to 3.72%. Bond yields for the month fell 5.2 basis points to 5.133%, while the 30-year yield fell 2.5 basis points to 3.881%.
Gold is usually sensitive to movements in interest rates because it can affect the opportunity cost of holding non-yielding bullion.
Meanwhile, the US dollar fell after the CPI figures, with the US Dollar Index (DXY) slipping 0.5% to 103.14, from an opening of 103.65. A weaker dollar is good for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
In other metals markets, copper futures rose to $3.834 a pound. Platinum futures fell to $991.80 an ounce. Palladium futures rose to $1372.50 an ounce.
- According to the performance on the daily chart below, continuing to sell XAU/USD gold, breaching the support levels at 1935 and 1919 dollars, respectively, will be a breach of the general trend.
- It will still has a chance to rise, and at the same time, gold investors may search for new levels to buy.
- On the other hand, and for the same period of time, the bulls will regain control of the trend in the event that the price of gold moves towards the resistance levels of 1965 and 1985 dollars, respectively.
- After the last level, the psychological resistance of 2000 dollars per ounce can be expected.
The decisions of the US Central Bank, the results of the rest of the important US economic data, and the decisions of the rest of the central banks will have an impact on the course of the gold price in the coming days.
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