Spot gold retreats as U.S. CPI spikes, potentially cancelling June's rate cut expectations - U.S. (PPI) data next
The precious yellow metal saw a downturn on Wednesday, largely driven by a spike in inflation data, which coincided with the strengthening of the US Dollar Index (U.S. DXY) to 105.15.
This development dampened expectations for the U.S. Federal Reserve to start interest rate reductions as early as June.
In March, the Consumer Price Index (CPI) showed a 0.4% increase from February and a 3.5% increase from the previous year, slightly surpassing expectations.
Core prices rose more than expected, excluding volatile food and energy categories.
Following this data release, markets adjusted their expectations, with fewer bets on the Federal Reserve cutting rates multiple times this year.
Initially, forecasts suggested there might be six or more rate cuts through 2024.
However, minutes from the Fed's March meeting suggested concerns about stalling progress toward the inflation target, potentially requiring a longer period of restrictive monetary policy.
This has sparked speculation about whether Fed Chairman Jerome Powell's earlier suggestion of three rate cuts has shifted, given ongoing resistance to inflation.
Investors will now focus on Thursday's Producer Price Index (PPI) release, which could corroborate Wednesday's CPI data.
Based on technical assessment, the Relative Strength Index (RSI) 3-day 'lookback' indicator shows positivity but is weaker due to the bearish divergence, while the Moving Average Convergence Divergence (MACD) remains positive.
Additionally, the ADX (trend) indicator signals a ranging market.
Traders should assess key points and adjust strategies to manage risks effectively amid high volatility, especially with imminent U.S. data releases.
As the market eases lower, it may reach the $2,300 area before any demand returns.
Daily Chart Spot Gold
This content is provided by Australian Financial Services Corporation (AFSC) Pty Ltd (AFSC), trading as Crystal Ball Finance. AFSC is a corporate authorised representative (CAR No. 001275455) of ShareX Pty Ltd (AFSL No. 519872).
For information relating to our financial services, you should refer to our Financial Services Guide.
Crystal Ball Finance content is designed as the opinion only and is general in nature. It does not take account of your objectives, financial situation or needs. Nothing in this content shall be construed as a solicitation to buy or sell any security or product or to engage in or refrain from engaging in any transaction. There are risks involved in any financial investment and trading strategy, and the value of any investment can and does fluctuate and may even become valueless. You should consider the appropriateness of any investment or trading strategy having regard to your circumstances. We recommend that you obtain financial, legal and taxation advice before making any financial investment decision or applying any trading strategy. This content is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. Crystal Ball Finance does not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use or application of its content.