Gold price: here's what to expect in the week ahead

Gold price recouped its losses from earlier in the week as the US dollar weakened. In the week ahead, the focus will be on the FOMC meeting minutes.

Inflation talks

On Wednesday, the strong inflation data pushed the metal’s prices lower. Investors were pondering on the possibility of Fed hiking interest rates earlier than expected. The US Bureau of Labor Statistics noted that consumer prices had risen by 0.8% in April. The figure is the highest in over a decade, and significantly surpassed the forecasted 0.2%. PPI data also came in higher-than-expected at an annualized rate of 6.2% compared to the prior month’s 4.2% and predicted 5.9%.   

However, the stagnation of US retail sales, coupled with the Fed officials’ remarks, caused the US dollar to retreat while pushing gold price higher. Based on the inverse correlation between the value of the US dollar and precious metals, a weakening dollar acts as a bullish catalyst for gold price.

As the impact of the stimulus checks lessens, US retail sales remained unchanged in April after rising by 10.7% in March. Economists had expected a reading of 1.0%.

At the same time, Fed officials have concurred with the central bank’s position that the expected inflation is transitory. Governor Christopher Waller and Thomas Barkin, Richmond Fed President, have both downplayed the ongoing inflation fears. In the coming week, the focus will be on FOMC meeting minutes. The Federal Reserve has maintained a dovish tone, indicating that the economic recovery is still uneven and incomplete. As such, its accommodative policy is likely to continue, at least in the short term.  

Gold price technical outlook

Gold price closed Friday’s session at 1,843.16, up by 0.91%. The precious metal recouped its losses from earlier in the week, when it had dropped to 1,810.36 on Thursday. On a daily chart, it is trading above the 25 and 50-day exponential moving averages. Besides, it is within an ascending channel. Based on these indicators, it is likely to extend its gains in the ensuing sessions.

In the new week, I expect gold price to rise further to 1857.67, where it is likely to find resistance along the channel’s upper border. Towards the end of the week, the bulls may succeed to push the prices to 1,865.55.

On the flip side, the bears may manage to push gold price back to the psychological level of 1,800. If that happens, it will be a sign that level will remain crucial for the better part of the year.