US core prices have leaped by 0.6% MoM in April, substantially higher than expected. After dropping to the low $1,840s shortly after the data release, gold popped higher into the $1,850s. Despite today's bounce, stubborn inflation poses downside risks for the yellow metal, strategists at TD Securities report.
“The US CPI came in at a higher-than-expected 0.3% MoM, with core also up a higher-than-expected 0.6%. While inflation is down to 8.3% and 6.2% y/y in April, it is higher than was anticipated and may suggest that inflation is more entrenched than the Fed is anticipating.”
“The fact that the CPI is driven by rents and services implies that price pressures are entrenched and may manifest in upward pressure on wages too. This likely means gold traders will expect the Fed to step up their hawkish signals.”
“Given that positioning is still tilted to the long end of exposure, continued higher-than-expected price prints could easily send gold below $1,830/oz in the not too distant future.”
“If XAU/USD dips below the $1,830s support levels, technicians could pull the yellow metal down toward the $1,790s fairly quickly.”
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