Gold Price Prediction – Prices Decline on Stronger Inflation Figures as the Dollar Rises

Gold prices declined on Wednesday in the wake of the stronger-than-expected U.S. inflation report. The stronger than expected headline and core inflation numbers reported by the Labor Department buoyed U.S. yields, which drop up the U.S. dollar. The stronger dollar weighed on gold prices generating headwinds for the yellow metal.

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Technical analysis

Gold prices declined on Wednesday. Support is now seen the 10-day moving average at 1,844. Target resistance is seen near the Fibonacci retracement level of 50.0%, which is seen near 1,876. Additional support is seen near the 50-day moving average at 1,746. The 10-day moving average has crossed above the 50-day moving average, meaning that a short-term uptrend is now in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs when the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

Inflation Rise More than Expected

According to the Labor Department reported, inflation in April accelerated at its fastest pace in more than 12 years. The Consumer Price Index rose 4.2% year over year. Expectations were for a 3.6% increase. The month-to-month gain was 0.8%, against the expected 0.2%. Excluding food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% monthly. The respective estimates were 2.3% and 0.3%. The increase in the annual headline CPI rate was the fastest since September 2008. Energy prices overall jumped 25% from a year earlier. Fed officials repeatedly have said they will not raise interest rates or pull back on monthly bond purchases until inflation averages around 2% over an extended period.