Gold price decreases as traders anticipate US CPI data

• Gold retreats slightly but remains bullish, balancing between risk sentiment and US Treasury yields.
• The decline in NFIB Small Business Optimism highlights cautious economic outlook.
• Federal Reserve’s rate cut expectations and cautious stance underpin market sentiment.

Gold prices retreated on Tuesday after reaching all-time highs of $2,365 earlier in the North American trading session. The slight pullback was attributed to a risk-on sentiment in the market and decreasing US Treasury yields, while the US Dollar saw a pause after a 0.16% drop on Monday. Currently, XAU/USD is trading at $2,346, showing a 0.35% gain.

Additional Insight: The movement of gold prices is influenced by a combination of factors including market sentiment, economic data, and geopolitical events. Investors closely monitor these variables to gauge the direction of the precious metal’s value.

The US economic calendar had limited data releases, with the NFIB Small Business Optimism Index for March showing a decline for the third consecutive month from 89.4 to 88.5. Market participants are now awaiting the release of the US Consumer Price Index (CPI) and the Federal Open Market Committee (FOMC) Minutes scheduled for Wednesday.

Insight: Economic indicators like the NFIB Small Business Optimism Index provide insights into the sentiment and confidence levels of small businesses, which are crucial for understanding the overall health of the economy.

Currently, Federal Reserve officials are maintaining an optimistic outlook on potential rate cuts, emphasizing the importance of patience in their decision-making process.

Daily digest market movers: Gold trims gains amid high US yields

• The US Consumer Price Index (CPI) for March is expected to increase by 0.3% MoM, lower than February’s 0.4%, but higher than the required 0.17% pace to stabilize inflation at the 2% target. The annual CPI is forecasted to rise from 3.2% to 3.4%.
• Core CPI, which excludes volatile items, is anticipated to decrease from 0.4% to 0.3% MoM and from 3.8% to 3.7% YoY.
• Strong inflationary pressures may impact expectations for potential rate cuts, while softer inflation data could fuel speculations for rate reductions.
• Following a robust jobs report last week, interest rate investors are cautious about a Fed rate cut in the upcoming meeting in June, with the odds declining from approximately 70%.
• The CME FedWatch Tool suggests a slightly more optimistic sentiment among traders, with the chances of a 25-basis-point rate cut in June rising from 52% to 57.8%.
• The World Gold Council’s data reveals that the People’s Bank of China increased its gold reserves by 12 tonnes to a total of 2,257 tonnes, positioning it as the largest buyer of the precious metal.

Technical analysis: Gold’s advance stalls near $2,350 as bulls take a breather

Gold’s upward momentum paused around the $2,350 level as the Relative Strength Index (RSI) reached 84.23, its highest point since March 8. The overbought RSI signals a potential decrease in investor interest in gold at current levels.

If gold prices drop below $2,350, the next support level could be at the April 8 daily low of $2,303. A breach of this level might lead to further downward pressure, potentially testing the high from March at $2,222, with additional support at $2,200.

On the upside, if XAU/USD resumes its upward trajectory, investors are targeting the $2,400 price level and beyond.