Gold prices

Gold Price Stalls At 1900 As Key Fed Inflation Metric Soars

Gold price (XAU/USD) has had an essentially choppy initial response to the Fed’s inflation gauge rise, but the yellow metal is now being offered as markets digest the numbers. 

Core PCE Price Index m/m rose 0.7% in April and 3.1% on an annualized basis to provide the most substantial increase in this metric since 1994. The numbers surpassed the market expectation of 0.6% and 2.9% for the monthly and annualized figures, respectively. 

The numbers validate higher inflation expectations, first brought to the fore by the rise in consumer inflation for April. It would be interesting to see the response of the various FOMC members, who largely dismissed the previous figures as a one-off, transitory event. However, the markets are holding on to the expectations that the higher Core PCE Price Index would at last force the Fed to consider tapering, which is a USD-positive event.

Technical Levels to Watch

Two pinbars and an intervening doji between them signify that a further advance on the XAU/USD pair is starting to lose steam, making the possibility of a pullback becoming more real.

The 1-2-3-4-5 Elliot wave pattern on the chart is also an indication that the corrective wave is overdue. Bears could initiate this from the 1900.76 resistance, targeting 1881.99 as the initial target. 

Further correction may allow for a dip towards 1869.39 followed by an attempted return to a resistance mark before sellers re-enter to initiate the drop towards 1850.78 or 1821.55. 

On the flip side, a push above 1900.76 continues the advance and targets 1918.68 initially, followed by a potential push towards 1940.15 or 1960.22. Watch out for responses from FOMC board members to the Core PCE Price Index number, watching out for responses that could put the USD on the back foot to achieve this outlook. Any bearish corrections in the uptrend could be dip-buying opportunities.

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Gold Price (XAU/USD) Daily Chart

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