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Gold corrects after US data shows pessimism mixed with inflation fears

  • Gold falls after US consumer sentiment data shows a sharp decline in optimism and higher inflation expectations.
  • Higher inflation could keep interest rates high, reducing Gold's appeal.
  • XAU/USD's uptrend corrects again and puts pressure on a key support level.

The price of Gold (XAU/USD) retreats and falls half a percentage point to $2,340 on Monday, after data on US consumer sentiment suggested that interest rates could remain elevated for longer, reducing the attraction of gold.

Gold Price Falls Following Michigan Sentiment Survey Data

The price of Gold has reversed lower following the release of the University of Michigan Consumer Sentiment Survey on Friday, which showed a surprising drop in sentiment, while at the same time inflation expectations were higher.

The University of Michigan's preliminary consumer sentiment index for May fell to 67.4 from 77.2, when economists had expected a much milder decline to 76.0.

At the same time, the long-term inflation expectations component rose to 3.1% from 3.0% previously.

Higher inflation expectations suggest the Federal Reserve (Fed) could further delay its expected interest rate cut. This is negative for Gold, as higher interest rates increase the opportunity cost of holding Gold compared to interest-bearing assets such as bonds or cash.

Technical analysis: The price of Gold falls sharply

The price of Gold (XAU/USD) is retreating after the rally at the beginning of May.

The Relative Strength Momentum Indicator (RSI) moved into neutral territory during the US session on Friday after being overbought, giving a sell signal, and the price responded accordingly.

Gold has reached an important support level from the previous highs at $2,350, which it is attempting to break. If he succeeds, he could continue to fall.

XAU/USD 4-hour chart

Despite the pullback, the short-term trend remains likely bullish, suggesting that the precious metal is likely to stop correcting at some point and resume its uptrend. However, there is still no indication that this will happen.

Assuming the uptrend resumes, the next target for Gold would be around $2,400, roughly on par with April's highs. A break above $2,378 on May 10 would be confirmation.

The medium and long-term charts (daily and weekly) are also bullish, adding a supportive backdrop for Gold.

Economic indicators

University of Michigan 5-Year Consumer Inflation Expectations

The University of Michigan Survey of Consumers includes a component of long-term, five-year inflation expectations, which the Fed uses to calculate its quarterly Common Inflation Expectations Index.

More information.

Last post: Fri May 10, 2024 14:00 (Prel)

Periodicity: Monthly

Current: 3.1%

Consensus:

Former: 3%

Fountain: University of Michigan

Source: Fx Street

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