Gold price outlook ahead of the US inflation data

By:
on Jun 10, 2021
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  • Gold price is on a consolidation pattern as investors await cues from the US inflation data.
  • The precious metal is finding support from the declining Treasury yields; currently at 1.49.
  • Global gold ETFs recorded inflows of $3.4 billion in May and three months of outflows.

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Gold price is trading sideways ahead of the US inflation data. The declining Treasury yields have also offered support to the precious metal.

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US inflation data

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Gold price has been on a consolidation pattern as investors stay on the sidelines ahead of the US CPI data. Economists expect consumer prices to have risen by 4.7% in May on a year-on-year basis. With the exclusion of energy and food, the core CPI is forecasted at 3.4% YoY compared to the prior month’s 3.0%.

Notably, there may be a knee-jerk reaction in the market if the inflation data comes in higher than expected. However, the fundamentals are still favorable for gold price. This is largely because of the Federal Reserve’s insistence that the ongoing inflation is transitory. The central bank is keen on maintaining an accommodative monetary policy until the economic recovery is even and complete.

Gold inflows

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Global gold ETFs recorded inflows of 61.3 tonnes ($3.4 billion) in May. This represents a significant rise after the 3 consecutive months of gold outflows. According to the World Gold Council, central banks in different parts of the world are positive on gold.     

Treasury yields

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The decline in US bond yields has further supported gold price. At the time of writing, the benchmark 10-year Treasury yields were down by 2.65% at 1.49. It is a significant decline from 1.61 on Monday. Since the beginning of the week, it has dropped by about 7.39%. The declining bond yields have boosted the precious metal’s appeal as a hedge against inflation. Notably, the 5 and 30-year Treasury yields have also declined by 2.09% and 1.62% respectively.

Gold price technical outlook

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Gold price is up by 0.01% at 1,888.84. It is trading sideways for the third consecutive session as investors pause on placing huge bets ahead of the US inflation data. On a two-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages.

I expect the precious metal to seesaw along the 25 and 50-day EMA at 1,891 ahead of the US CPI data. As a reaction to the data, it may drop to find support at 1,880. On the flip side, a lower-than-expected figure may push the price to 1,900.

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