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Gold Value Outlook: XAU/USD Could Fall as Markets Pivot Again to Inflation Woes

Gold Basic Forecast – Bearish

  • Gold prices misplaced upside momentum this previous week because the US Dollar rallied
  • Stable non-farm payrolls report underscored the Fed’s financial confidence
  • Crude oil prices and Could’s US CPI report might hold XAU/USD pressured

Gold costs have been unable to search out additional upside momentum this previous week. In reality, the dear metallic was principally little modified. Broadly talking, XAU/USD noticed its downtrend since March pause in the midst of Could, climbing as a lot as 3.11% earlier than trimming beneficial properties. Is the yellow metallic dropping its uphill battle, readying to renew the broader downtrend?

The highway forward stays difficult for gold, with the downtrend pause doubtless an indication of profit-taking or consolidation as markets usually don’t transfer in straight traces. In Could, merchants appeared to pivot from inflationary woes to recessionary ones. That resulted within the markets considerably trimming 2023 Federal Reserve fee hike expectations.

That’s as odds of a 50-basis level fee hike in September dwindled. As a consequence, Treasury yields and the US Greenback weakened. When these property are transferring in the identical course, on this case downward, that tends to bode effectively for gold and vice versa. However, this previous week, we noticed the Fed stay assured concerning the financial outlook and undermine expectations of a pause in September.

In consequence, bond yields are again on the rise and the US Greenback might be pivoting again larger. This previous Friday, one other strong non-farm payrolls report crossed the wires, underscoring the central financial institution’s confidence. Unsurprisingly, gold turned decrease because the US Greenback climbed and Treasury charges rallied. As such, it’s trying to be extra tough occasions forward for XAU/USD.

All eyes within the week forward are on Could’s US CPI report. Headline inflation continues to be anticipated to stay at 8.3% y/y, the identical as in April. The core gauge, which excludes unstable meals and vitality costs, is seen slowing to five.9% y/y versus 6.2% prior. With crude oil prices at their highest since early March, inflation appears unlikely to go away for now. As such, a powerful USD and better bond yields might proceed working in tandem to sap gold’s enchantment.

Gold Versus US 10-Yr Actual Yield – Every day Chart

Gold Price Outlook: XAU/USD May Fall as Markets Pivot Back to Inflation Woes

Chart Created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the feedback part under or @ddubrovskyFX on Twitter

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