Gold prices were unable to find further upside momentum this past week. In fact, the precious metal was mostly little changed. Broadly speaking, XAU/USD saw its downtrend since March pause in the middle of May, climbing as much as 3.11% before trimming gains.
The future for gold remains challenging, with the downtrend break likely a sign of profit-taking or consolidation as markets often do not move in straight lines. In May, traders seemed to pivot from inflationary woes to recessionary ones. That resulted in the markets significantly trimming 2023 Federal Reserve rate hike expectations.
All eyes in the week ahead will be on May’s US CPI report. Headline inflation is still expected to remain at 8.3% y/y, the same as in April. The core gauge, which excludes volatile food and energy prices, is seen slowing to 5.9% y/y versus 6.2% prior.
With crude oil prices at their highest since early March, inflation seems unlikely to go away for now. As such, a strong USD and higher bond yields may continue working in tandem to sap gold’s appeal.
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