Gold prices opened the week with positive signals but quickly weakened as pressure from hot inflation in the US, high bond yields and a stronger USD continuously weighed heavily on the market.
Spot gold started the week around 4,687 USD/ounce, then surged and at one point surpassed 4,768 USD/ounce in the first session of the week. However, the upward momentum quickly cooled down as a series of US economic data strengthened expectations that the US Federal Reserve (Fed) would maintain high interest rates for longer.
The CPI report released on Tuesday showed that US inflation in April increased by 0.6%, bringing annual inflation to 3.8%, causing gold prices to turn down to the 4,700 USD/ounce zone.
Selling pressure increased more sharply on Wednesday after the producer price index (PPI) increased by 1.4% – the strongest increase since 2022, pulling gold prices down sharply to around 4,680 USD/ounce.
By the end of the week, the market witnessed the strongest decline when gold broke through the 4,600 USD/ounce mark amid a sharp increase in US bond yields. The yield of 10-year US Treasury bonds rose to 4.54%, while the USD continued to strengthen.
By the end of the week, spot gold prices fell to around 4,543 USD/ounce, losing more than 3.2% in the week and about 13% lower than when the Iranian conflict broke out.
According to analysts, oil prices maintained above $100/barrel due to the disruption in the Ormuz Strait have increased concerns about prolonged inflation, thereby causing the market to almost eliminate expectations of the Fed cutting interest rates this year.
Mr. Marc Chandler – Director of Bannockburn Global Forex said that gold has now broken through the important fluctuation zone established from the beginning of the week and is facing the risk of deeper correction if it loses the support level of 4,500 USD/ounce.
Meanwhile, Mr. Adrian Day - Chairman of Adrian Day Asset Management said that the gold market will continue to fluctuate strongly due to supporting factors and pressures continuously changing its dominant position.
Many experts believe that although short-term pressure is still high, buying pressure from central banks and long-term safe-haven demand are still important supporting factors for gold.
Mr. Darin Newsom – senior market analyst at Barchart. com said that the sharp decline at the end of the week may have partly relieved selling pressure in the futures market, thereby opening up the possibility of technical recovery in the short term.
Meanwhile, investors continue to closely monitor the developments of the Middle East conflict, oil prices, US bond yields and the results of the meeting between President Donald Trump and Chinese President Xi Jinping.
Kitco News' weekly gold survey shows that Wall Street analysts' sentiment is strongly leaning towards a short-term downward trend. However, individual investors still maintain a more positive view of gold.
Next week, the market will continue to monitor the Fed meeting minutes, housing data, manufacturing and US consumer confidence. However, according to analysts, the developments of the Middle East conflict and the impact of oil prices on inflation will still be the biggest influencing factors for the gold market.
