Gold’s Bullish Momentum Faces Test with Upcoming US Inflation Data

Recent Performance: Gold has climbed 2.60% since the start of May and 13% since the beginning of the year, continuing its rally above key moving averages across various timeframes. However, the market remains cautious as investors are hesitant to make significant moves ahead of today’s U.S. Producer Price Index (PPI) data and tomorrow’s Consumer Price Index (CPI) report.

Key Support Level: The recent corrective wave on the daily chart initiated since Mid-April has shown strong signs of support above $2,280, an area aligning with the upper boundary of the 45-day exponential moving average (EMA) channel. This support is critical for sustaining the ongoing bullish trend. Additionally, a bullish reversal pattern and a move above key moving averages on the 4-hour timeframe have aligned the short-term trend to bullish.

Momentum Indicators: The recent correction since mid-April has normalized higher timeframe momentum indicators, which had previously shown extended overbought conditions. This reset provides room for potential continuation of the current rally.

Trend Continuation Levels: The market is testing intraday support at $2,335, aiming to revive bullish momentum. Short-term resistance stands at $2,350. Successful breach above the resistance level could accelerate momentum and encourage bulls to set new targets at the recent high of $2,380 and potentially retest the all-time high at $2,430.

Reversal Levels: The short-term bullish trend is currently being supported by the $2,335 level. If the price fails to maintain this level, it could signal a bearish reversal in the short term. Such a move would bring the price back into last week’s range, increasing the likelihood of retesting the longer-term daily support level at $2,280. While the daily trend remains bullish above $2,280, a break below this level could significantly alter the medium-term outlook to bearish and lead to an extended correction.

U.S. Economic Data Ahead: This week’s U.S. inflation data has the potential to significantly influence the Federal Reserve’s policy decisions. An easing in inflation could lead to expectations of rate cuts as early as September, boosting gold further. Conversely, higher-than-expected inflation can push gold into a consolidation phase, turning attention to the recent support levels.

Gold 4 Hour Chart

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