On Tuesday (April 13) sub-market intraday, spot gold moderately rebounded, now trading around $1,733 / oz. Financial website FXStreet analyst Dhwani Mehta wrote a new article on Tuesday to analyze the trend of gold prices.
“Gold is showing some signs of recovery as Treasury yields weaken,” Mehta writes. However, the rebound in the dollar index is likely to limit gold’s gains.”
Ahead of the key U.S. CPI, gold held on to key support around $1,731 / oz, which is also where the 21-day moving average (DMA) is, Mehta said. All eyes are on the US CPI for a new direction.
Mehta writes: “As US Treasury yields reversed course after a good 3-year auction, they edged higher. Gold fell nearly $11 on Monday, its second straight decline. Meanwhile, US stocks closed mixed, while a positive tone in Asia and a broad rebound in the US dollar kept gold buyers on their toes.”
The yield on the benchmark 10-year Treasury note rose to 1.673% on Monday. Higher yields threaten gold’s appeal as an inflation hedge because they increase the opportunity cost of holding bullion.
Mehta noted that recent strong U.S. PPI data have boosted inflation expectations, which appears to be supporting gold, a traditional hedge against inflation. Markets are awaiting the release of US CPI data for fresh insights on the strength of the economy and the prospect of Fed rate hikes.
Last Friday’s U.S. producer-price index data were surprisingly strong. The U.S. producer price index rose 1% month-on-month to an annual rate of 4.2%, the highest since September 2011.
On Tuesday at 20:30 Hong Kong time, the US will release March consumer price index data. If U.S. inflation data comes in stronger than expected, Treasury yields could move higher, hurting gold.
Investors believe price pressures will increase as a result of increased fiscal and monetary stimulus and the reopening of businesses after the coronavirus blockade.
The U.S. consumer price index is expected to have risen 2.5 percent on a seasonally adjusted annualized basis in March, up from 1.7 percent the previous month, according to leading media surveys. The U.S. core consumer price index is expected to have risen 1.5 percent on a seasonally adjusted basis in March, up from 1.3 percent the previous month.
Analysis of the latest technical prospect of gold
With the 14-day relative strength index (RSI) edging higher and testing the midline, gold is expected to continue its rally from its 21-day moving average support, Mehta said. Monday’s high of $1,745 / oz will provide initial resistance, while bullish targets continue to break the 50-day moving average of $1,756 / oz.
Mehta said a loss of support at the 21-day moving average would not rule out a selloff toward the April 1 low of $1,706 an ounce. A break below that would put gold’s next support around the $1,700 round mark.
Mehta sees key intraday support at $1,724.99, $1,717.37 and $1,707.31, with key intraday resistance at $1,742.67, $1,752.73 and $1,760.35.