Gold Price Forecast: Gold Upside Test as US Rates Drop - Last Chance for Volatility

Gold Price Analysis and News

• Markets Take a Transitory View with Inflation
• Last Chance for FX Volatility Excitement
• Gold Levels to Watch

Markets Take a Transitory View with Inflation

US CPI rising to 5%, above expectations of 4.7% received a mere shrug of the shoulders from markets. The release did little to stem the decline in US yields with the 10yr now at the lowest level since early March, highlighting just how short the market is of USTs as bond vigilantes feel the squeeze. However, looking under the hood, CPI had once again been boosted by transitory factors with used cars and trucks up a sizeable 7.3% on the month (29.7% Y/Y), which will likely reinforce the Fed’s message that they will remain patient with the inflation spike seen as temporary.

US Treasury Yields Fall Through May Lows

Source: Refinitiv

Gold Back at 1900

In light of the pullback in US yields, in particular real yields, gold prices are once again hovering around the 1900 level. However, as volatility remains subdued, chances of a break out are somewhat limited and thus a combination of falling real yields and a softer USD would be needed to challenge the May high (1916). For now, a narrow range looks set to persist for the precious metal.

US Real Yields vs Gold

Source: Refinitiv

Gold Technical Levels: Levels to keep a note of is the May peak at 1916, while support remains situated at 1865-75.

Source: Refinitiv

Last Chance for FX Volatility Excitement

Next week is arguably the last chance to stir some volatility in markets before the summer lull with the FOMC meeting scheduled. That being said, I remain doubtful that the Fed will spark much life into markets, which appears set in maintaining this low vol backdrop.