US inflation data revealed on Wednesday and Thursday weighed on the greenback, as traders best hedge against inflation is Gold
Geopolitical tensions also remain elevated and the prospects of Russo-Ukraine peace poor, underpinning XAUUSD.
Gold Price (XAUUSD) remains steady as the Asian Pacific session begins, trading at $1978.18 a troy ounce, threatening to launch another retest towards the $2000 mark as US Treasury yields across the curve fell, weighing on the greenback.
On Wednesday, another raft of US inflation data crossed the wires. In March, prices paid by producers, also known as the Producer Price Index (PPI), added further pressure on the Federal Reserve to hike rates, as its reading rose by 11.2% y/y, higher than expected and the most significant jump since 2010. At the same time, the so-called core PPI, which excludes volatile items, increased 9.4% y/y, higher than the 8.4% foreseen.
Now that US inflation data is in the rearview mirror, the hot inflation surrounding the US economy reinforces the case of the Federal Reserve to raise rates aggressively. Fed officials have opened the door for 50-bps rate hikes at its May meeting, while STIRs shows a 94% chance of a 0.50% lift to the Federal Funds Rate (FFR).
Late in the US session, Fed Governor Christopher Waller (voter in 2022) crossed the wires. Waller said that data supports 50 bps increases, and he prefers to front-load aggressive hikes at the May meeting and possibly more in June and July. He stated that he wants to get above neutral by the latter half of this year.
Also read: Silver Price Forecast: XAG/USD bulls march firmly towards $26.00 on a soft greenback
Alongside falling US Treasury yields, geopolitics is another reason why investors are buying Gold, with the most recent updates on the Russo-Ukraine war suggesting that peace remains farther than expected.
Russia will view US and NATO vehicles transporting weapons on Ukrainian territory as legitimate military targets, Russia's Deputy Foreign Minister said on Wednesday, comments that will escalate tensions with the West. The latest punchy Kremlin rhetoric comes after Putin said on Tuesday that peace talks with Ukraine had hit a dead end.
Also read: Russia will view US and NATO vehicles transporting weapons on Ukrainian territory as legitimate target
Instead, Putin promised that Russia would achieve all of its “noble” aims in Ukraine. “We have again returned to a dead-end situation for us,” Putin told a news briefing during a visit to the Vostochny Cosmodrome 3,450 miles (5,550 km) east of Moscow. “We don't intend to be isolated,” Putin added. “It is impossible to severely isolate anyone in the modern world – especially such a vast country as Russia.”
Gold Price Forecast(XAUUSD): Technical outlook
Gold Price bulls will be eyeing a test of the $2000 areas in the near future. However, should a strong US dollar prevail amid further hawkish rhetoric from Fed speakers given their ongoing concerns about US inflation, the $1930s could come under pressure again as this correlates with a 61.8% golden ratio retracement. If that were to give out, the near-term prospects of a move higher will be severely diminished.
