Gold Soars on Cooler-Than-Expected US Inflation, Fueling Fed Rate Cut Bets

: George Solotarov; 12 June 2024; Hits: 95

Gold Soars on Cooler-Than-Expected US Inflation, Fueling Fed Rate Cut Bets

Gold (XAU/USD) prices surged over 1% to the $2,330 range on Wednesday following the release of US inflation data that came in below expectations. The news sparked increased speculation that the Federal Reserve (Fed) may cut interest rates sooner than previously anticipated, a move that would benefit non-yielding assets like gold.

Inflation Cools, Gold Heats Up

The May Consumer Price Index (CPI) report showed both headline and core inflation easing more than economists predicted. This has led to a surge in market expectations for a potential Fed interest rate cut as early as September, with the probability now approaching 70% according to the CME FedWatch tool.

Market Focus Shifts to Fed Meeting

While the Fed isn't expected to adjust interest rates at its upcoming meeting, ending at 18:00 GMT, investors are eagerly awaiting updates to the Summary of Economic Projections (SEP), also known as the "dot plot." This will provide crucial insights into how Fed members envision the future path of interest rates.

Technical Analysis: Gold Retests Resistance Amid Short-Term Downtrend

Gold is currently retesting the resistance level at $2,315, which previously acted as the bottom of its trading range. Despite this upward move, the short-term trend remains bearish, with the next potential target at $2,285. A deeper pullback could see gold test support at $2,279.

However, a decisive break above $2,315 would signal a shift in momentum and potentially open the door for further gains. It's important to note that while the short-term outlook is bearish, gold's medium and long-term trends remain bullish, suggesting a strong possibility of recovery in the future.