GOLD Price Analysis – May 11, 2023

Daily Price Outlook

Gold prices saw a decline on Wednesday as investors' optimism about potential Federal Reserve rate cuts dissipated following the release of the US inflation report, prompting some to secure profits.

Edward Moya, a senior market analyst at OANDA, suggested that the Federal Reserve may need to maintain higher rates for a more extended period. "For gold's rally to persist, the market needs to price in more aggressive rate cuts," he added.

The release of data showing that the US Consumer Price Index (CPI) rose by 4.9% year on year in April caused a temporary 0.7% surge in gold prices. However, the increase fell short of the anticipated 5% rise, causing gold prices to revert to a downward trajectory. The CPI saw a month-over-month increase of 0.4% in April, following a 0.1% rise in March.

This data dampened the rising anticipation for the Federal Reserve's 11th consecutive rate hike in June, causing most futures contracts related to the Federal Reserve's rate to stagnate.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, warned that, with core inflation remaining steady and exceeding the Fed's target, gold could face challenges in the short term.

While gold is typically seen as a hedge against inflation, increases in interest rates dampen the demand for the non-yielding asset.

Despite ongoing economic uncertainties, including the possibility of a US debt default, some analysts believe that gold may attempt another surge to record highs. Rhona O'Connell, an analyst at StoneX, urged a closer look at the state of the banking system and the precarious nature of the debt ceiling discussions.

In India, gold prices are determined by a variety of factors such as global demand, currency fluctuations, interest rates, and governmental regulations. Additionally, international factors such as global economic growth, the strength of the dollar against other currencies, and more, also influence these prices.

GOLD – Technical Outlook

On Monday, gold prices remained directionless, fluctuating within a broad range of $2020 to $2047. Market participants are holding off for significant news from the US economy, given that recent US inflation data did not spur any substantial movement.

Technically, the 50-day exponential moving average is creating resistance around the $2035 mark, whereas the RSI and MACD indicators seem to be in a buying and oversold zones respectively, indicating uncertainty among investors.

In the daily chart, the trendline appears to offer support to gold prices near $2025, and a bounce is possible if prices hold above this level. However, if gold prices fall below $2020, the next likely support levels are around $2010 or $2000.

Conversely, should gold prices increase, immediate resistance is expected around the $2047 and $2060 levels.