- Gold oscillated in a narrow band around the $1,850 area through the first half of the European session.
- Aggressive Fed rate hike bets pushed the USD to a two-decade higher and capped the commodity.
- Retreating US bond yields and the global flight to safety helped limit losses for the safe-haven metal.
Gold struggled to capitalize on the overnight post-US CPI gains and witnessed subdued/range-bound price action on Thursday. The XAUUSD seesawed between tepid gains/minor losses through the first half of the European session and was last seen trading in neutral territory, around the $1,850 region.
The latest US consumer inflation readings came in higher-than-expected and reinforced market bets for a more aggressive policy tightening by the Fed. In fact, money market futures are now pricing in an 81% chance of a jumbo 75 bps rate hike in June amid concerns that China's zero-covid policy and the war in Ukraine would continue to push consumer prices higher. This, in turn, pushed the US dollar to its highest level in nearly two-decades and dented demand for the dollar-denominated gold.
The prospects for rapid interest rate hikes in the US, along with strict COVID-19 lockdowns in China, have been fueling concerns about softening global growth and a possible recession. This continued weighing on investors' sentiment and was evident from an extended sell-off in the equity markets, which extended some support to the safe-haven gold. The global flight to safety, coupled with signs that inflationary pressures in the world's biggest economy are peaking, dragged US Treasury bond yields higher. This was seen as another factor that helped limit any deeper declines for the non-yielding yellow metal.
Even from a technical perspective, spot prices showed some resilience below the very important 200-day SMA, which further held back bearish traders from placing aggressive bets. Market participants now look forward to the US Producer Price Index (PPI), due for release later during the early North American session. The data, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to recovery gains near 1.0850 ahead of Fedspeak
EUR/USD trades in positive territory near 1.0850 on Friday following a four-day slide. China's stimulus optimism and a broad US Dollar correction help the pair retrace the dovish ECB decision-induced decline. All eyes remain on the Fedspeak.
GBP/USD pares UK data-led gains at around 1.3050
GBP/USD is trading at around 1.3050 in the second half of the day on Friday, supported by upbeat UK Retail Sales data and a pullback seen in the US Dollar. Later in the day, comments from Federal Reserve officials will be scrutinized by market participants.
Gold at new record peaks above $2,700 on increased prospects of global easing
Gold (XAU/USD) establishes a foothold above the $2,700 psychological level on Friday after piercing through above this level on the previous day, setting yet another fresh all-time high. Growing prospects of a globally low interest rate environment boost the yellow metal.
Crypto ETF adoption should pick up pace despite slow start, analysts say
Big institutional investors are still wary of allocating funds in Bitcoin spot ETFs, delaying adoption by traditional investors. Demand is expected to increase in the mid-term once institutions open the gates to the crypto asset class.
Canada debates whether to supersize rate cuts
A fourth consecutive Bank of Canada rate cut is expected, but the market senses it will accelerate the move towards neutral policy rates with a 50bp step change. Inflation is finally below target and unemployment is trending higher, but the economy is still growing.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.