Gold – XAU/USD Analysis - May 12, 2021

U.S. CPI & Core CPI in Highlights!

The yellow metal prices rose as the U.S. dollar traded near a multi-month lower level. Investors were awaiting U.S. consumer price data to gauge inflation expected to release on Wednesday. The investors' interests remained high in bullion due to increased fear of high inflation and weak U.S. jobs data. The rising prices of gold could also be attributed to investors' started seeing gold as a hedge against inflation.

The U.S. Dollar Index that gauges the greenback's value against the basket of six major currencies also fell on Tuesday to its lowest level since February 25, below $90 level at $89.98, and supported the yellow metal prices during the first half of the day. However, gold could not sustain its bullish momentum, pulled back its gains, and turned them into losses during the second half of the day. The U.S. dollar recovered its strength after the JOLTS Jobs Opening data release and also because of favorable comments from various Fed officials.

At 15:00 GMT, the NFIB Small Business Index came in line with the expectations of 99.8. At 19:00 GMT, the JOLTS Job Openings surged to 8.12M against the forecasted 7.50M and supported the U.S. dollar that weighed on gold prices on Tuesday. On Tuesday, the New York Federal Reserve Bank President John Williams said that the Libor benchmark was unreliable. The market volatility at the start of the pandemic was evidence that funding markets based on rates could crumble under stress.

Meanwhile, the Fed Governor Lael Brainard also said on Tuesday that the weak jobs report from the United States in April showed the value of the Federal Reserve's willingness to wait before decreasing its support for the economy to ensure that the recovery was fully on track. Brainard said that supply chain disruptions and other reopening frictions were temporary and will be resolved over time, and they were unlikely to generate persistently higher inflation on their own. She attributed the prevailing higher prices to the increased demand generated after getting back to normal activities.

She added a need to remain patient through the transitory rise in prices associated with the reopening of economies. It will help ensure that a premature tightening of financial conditions did not limit the underlying economic momentum required to achieve the Fed's goals.

These comments from various Fed officials added strength to the U.S. dollar and kept the gold prices under pressure for the day. Furthermore, the worldwide coronavirus cases crossed 159.03 million, and the death toll reached 3,444,309 on Tuesday. The previous day, World Health Organisation announced that B.1.617, the coronavirus variant identified in India, was of global concern.

Scientists were suggesting that this variant could be more transmissible and there was also evidence but not confirmed that this variant was immune to coronavirus vaccines. WHO raised a warning and called the India variant a global concern along with other variants of coronavirus, including Britain, South Africa, and Brazil. These fears and negative developments surrounding the pandemic situation added strength to the U.S. dollar due to its safe-haven status and pressed on the yellow metal prices.

Gold Intraday Technical Level

Support Resistance

1829.59 1845.14

1822.32 1853.42

1814.04 1860.69

Pivot point: 1837.87

Gold - XAU/USD - Technical Outlook

Gold is trading sideways at 1,830, maintaining a narrow trading range of 250 pips. This trading range has an upper boundary of 1,846 and a lower boundary of 1,820. On the daily timeframe, gold is facing a hard time crossing over 1,846 levels as investors seem to wait for a solid reason to trigger buying. On the 4-hour timeframe, gold has completed 38.2% Fibonacci retracement at 1,818 level, and the same level is working as immediate support. A bearish breakout of this level opens up additional room for selling until 1,809 and 1,799 levels.

Conversely, the precious metal's resistance holds at 1,837 and 1,846. On Wednesday, the trader's focus will stay on the U.S. Inflation figures as these figures can drive strong price action in the market. Economists expect CPI to drop from 0.6% to 0.2%, while the Core CPI data is expected to be neutral. All the best!