Inflation is once again the focus of attention today with the release of the US’ April data.
The market is expecting the figure to be slightly lower than the previous month but remain at a historically high level, above 8%.
While any step lower will be welcomed with hopes that inflation in the US may have peaked, the pace consumer prices are rising remains far above the Federal Reserve’s target rate of 2% rate, forcing the US central bank to continue its series of hawkish measures to bring inflation down to more comfortable levels.
Despite this providing a negative outlook for gold, the price of the precious metal has perked up early on Wednesday to trade near $1,850 an ounce. In fact, equity indices are generally pointing upwards after a volatile few days of trading so far in May.
Live Gold Price - $/oz
For both gold and equities, today’s gains are likely a reflection of both asset classes being oversold in recent days after a brutal end to last week and start of this week in the markets.
The outlook for a series of interest rate hikes by the Federal Reserve, as well as the Bank of England and European Central Bank, over the coming months does cap how high gold can climb.
On the other side, any dips in gold’s price will attract buying interest from traders noting gold’s appeal as a hedge against inflation as well as a valued haven asset while the war in Ukraine continues. As such, gold is likely to remain within the $1,840-$1,870 an ounce range until a significant new factor emerges to outweigh the dominant drivers currently.
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