Gold Steady Close to its Record Highs Ahead of US CPI Inflation Update

  • XAUUSD
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XAU/USD Analysis

The US Federal Reserve raised rates by another 0.25% last week and did not rule out more moves, but opened the door to a pause of its aggressive hiking cycle that started a little over a year ago. The cumulative monetary restraint and the banking turmoil following the failure of SVB dictate a more conservative approach, as officials expect credit tightening.

Back in March, Chair Powell had equated the impact on policy, to a rate hike or even more [1] and on Wednesday he said that credit conditions will be of "particular focus" going forward [2]. Yesterday's lending survey showed a tightening in overall lending standards in the previous quarter, expected to continue through the rest of the year. [3]

The Fed's pause hint weighed on the greenback and along with risk aversion from the flare up of banking fears, sent XAU/USD to new record highs (2,080). The precious metal now has 2,100 in its crosshairs, but fresh impetus will be required for a test that would bring 2,179 in the spotlight.

Despite the conservative stance by the US central bank, the strong jobs report and elevated inflation, call for a restrictive monetary policy stance, so Wednesday's CPI inflation update could be critical for the next leg of the move.

Gold's previous visits above the 2,000 mark (in 2020 and 2022) had proved short-lived and it slipped again this time. This creates scope for a correction towards 1,949, but the downside appears well protected and strong catalyst would likely be needed for further losses that would put the 200Days EMA (at around 1,870) in question.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 09 May 2023 https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230322.pdf

2

Retrieved 09 May 2023 https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230503.pdf

3

Retrieved 15 Apr 2024 https://www.federalreserve.gov/data/sloos/sloos-202304.htm

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