Gold Stalls Above Former Highs

Gold prices continue to hold above the broken 2149.72-level former all-time highs. Following a breakout move last week, price has since softened as traders digest recent US data. An upside beat on the headline NFP reading for last month along with a hotter-than-forecast inflation reading have caused some near-term uncertainty ahead of next week’s Fed meeting. Traders are currently projecting the Fed will cut rates in June. However, if we hear any further pushback from the Fed next week this could well see that date being scaled out later in the year, leading USD higher near-term and weighing on gold.

US Data Due

Looking ahead this week, traders brace for three key US data points later today with PPI, unemployment claims and retail sales due. Given the Fed’s three main areas of focus are inflation, growth and the labour market, today’s data holds the power to drive plenty of volatility across markets if we see a big reaction in USD.

PPI in Focus

On the back of the upside we saw in CPI earlier in the week, bullish risks are now seen into today’s PPI release. With the bar set low for an upside surprise (core PPI expected 0.2% from 0.5% prior), USD could see a fresh pop higher if we come in above forecasts. This reaction will be amplified if we see expected strength in retail sales confirmed and any undershooting in unemployment claims. In this scenario, gold is likely to weaken near-term.

Technical Views

Gold

The rally in gold has stalled for now with price consolidating above the 2149.72 level. While this support holds, focus is on further upside. However, should we slip back below the level, focus shifts to 2069.41 as the next support along with the bull channel lows.