Gold Price Outlook Turns To Fedspeak After Consumer Inflation Expectations Jitter

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Gold, XAU / USD, US Dollar, Treasury Bills, Fed, Inflation Expectations – Talking Points:

  • Gold prices gave up most gains on Monday as Wall Street traded
  • Fed Inflation Expectations Investigate Baffled Markets
  • XAU / USD remains in short term bullish trend, wider bearish trend holds

Anti-fiat gold prices have climbed over the past 24 hours, but the yellow metal has lost most of its upward advance during the Wall Street trading session. XAU / USD initially capitalized on a weaker US dollar following last week’s disappointing nonfarm payroll report. But risk aversion reversed that trend as the safe haven greenback regained some of its lost ground.

The deceleration in gold appears to be occurring as a result of the Federal Reserve’s inflation expectations survey. The report showed that one-year price growth estimates were pegged at 3.36% in April from 3.24% previously. This is the highest result since September 2013. Consumers also expect the price of gasoline, food and rent to increase by 9.18%, 5.79% and 9.49% respectively.

Rising inflation estimates appeared to drive up Treasury bill yields, making relatively safer bonds more competitive compared to other parts of the market. This includes technology stocks, where perceptions of high valuations persist. These saw some of the biggest declines among stocks during the North American session. The flight to safety raised demand for the US dollar, pushing the XAU / USD lower.

With that in mind, all eyes are on Fedspeak in the remaining 24 hours. New York, San Francisco, Atlanta and Philadelphia branch presidents are scheduled to speak. If they continue to downplay rising CPI expectations in the near term, it could calm global equity markets, putting pressure on bond rates and the US dollar. Such a result could end up being good for gold. Check DailyFX Economic Calendar for more time from the Fed.

Technical analysis of gold

On the 4-hour chart below, gold remains in a short-term uptrend, defined by the rebound at the end of March. That said, the decline in resistance from 2020 maintains the broader bearish trend. The negative divergence of the RSI shows that the upward momentum is waning, which can sometimes precede a downward turn. This could therefore focus on the 20-period simple moving average.

XAU / USD 4 hour chart

Chart created using TradingView

– Written by Daniel Dubrovniksky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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