Gold Price Forecast: XAU/USD freezes around $1,850 on strong US CPI, DXY stable above 104.00

• Gold prices are stuck in a $14-range on upbeat US inflation.
• The DXY is sustaining above 104.00 as the odds of a rate hike by the Fed have bolstered.
• Higher US CPI at 8.3% indicates the Fed has a long way to go to ease price pressures.

Gold Price (XAU/USD) has frozen at around $1,852.00 after the US Bureau of Labor Statistics unveiled the US Consumer Price Index (CPI) for the month of April. The precious metal is oscillating in a minor range of $1,846.44-1,858.30 as investors are planning the next move after the higher-than-expected inflation figures. The US agency reported yearly inflation at 8.3% against the estimate of 8.1% while the core CPI figure has climbed to 6.3%, higher than the forecasts of 6%.

The Federal Reserve (Fed) is getting prepared for a bumpy ride as soaring price pressures will demand more mega rate hikes from the central bank. No doubt, the odds of a rate hike by 75 basis points (bps) have also strengthened as surging inflationary pressures are required to get contained with extremely aggressive quantitative measures.  

Meanwhile, the US dollar index (DXY) is establishing above 104.00 and is likely to remain topsy-turvy till it violates the 19-year high at 104.20 or breaks below the previous week’s low at 103.19. In today’s session, the US Producer Price Index (PPI) will remain in focus, which is expected to land at 10.7% on yearly basis.

Gold technical analysis

On an hourly scale, Gold prices have shown some signs of exhaustion on the downside. The bright metal has formed a Bullish Divergence. The asset formed a lower low at $1,832.09 while the momentum oscillator, Relative Strength Index (RSI) (14) denied forming a lower low, which shows exhaustion in the downtrend. The RSI (14) has shifted to a 40.00-60.00 range from a bearish range of 20.00-40.00 but seeks more validation. Gold bulls are firmer above the 20-period Exponential Moving Average (EMA) at $1,849.90.

Gold hourly chart