XAU at the main support level as it approaches the US CPI

May 11, 2022

1922

Gold, XAU / USD, Real Yield, Federal Reserve, CPI, Technical Forecast – Tips

* Gold prices may fall further based on the US Consumer Price Index (CPI).
* As cows lose confidence, gold ETF reserves fall in price
* If the accompanying support is broken, the XAU may threaten its lowest annual level

XAU at the main support: Gold prices are adjusting after falling overnight in Wednesday Asia-Pacific trading. The XAU is currently trading at its lowest level since February 11. The Federal Reserve’s re-fight against inflation has virtually wiped out its most influential winds. The Federal Reserve is expected to deliver nearly 200 additional contraction units by 2022, based on overnight index exchanges (OIS).

This has pushed back market-based inflation expectations, and real returns have continued to climb to a positive range, both of which undermine the fundamental gold outlook. Prices are now down more than 3 percent from last month, adding to a 2.10 percent pullback in April. The move has also effectively changed the bull’s narrative. Demands for a return to the much-anticipated level of 2000 have largely disappeared from analysts’ forecasts in recent weeks amid renewed reform among central banks.

Declining sentiment in gold reserves is reflected in the exchange traded funds (ETF). Total known gold ETF reserves have fallen to their lowest level since early April (see chart below). Some of these cases may be attributed to general fluctuations in stock markets, but do not show a good outlook. Tonight’s US CPI print may be the next price stimulus, as hotter-than-expected printing may further tighten conditions for the Federal Reserve to raise rates. Bloomberg Consensus estimates show that US inflation is up 8.1 percent from a year earlier.

XAU / USD Technical Forecast

Gold has fallen into a major trend line due to the low volatility of August 2021. The 200-day moving average (SMA) acts as a support. Breaking below this support will open the door for prices to test the lowest level in 2022 at 1778.50, although the psychological level of 1800 may provide a level for bulls where prices do not fall too quickly. The Relative Strength Index (RSI) is approaching the sell-off mark, indicating a recent weakening in prices.