Traders long on the Gold Spot price (XAUUSD) will be delighted after last week’s 1.38% upside momentum carried forward into the current week, with the spot price surging by 50 basis points.  

Today’s economic data releases will be paramount with the U.S. Core Inflation Rate and CPI data release. Following up the inflation reports will be the FOMC minutes which traders will use hand in hand with inflation data to gauge where the Federal Reserve’s interest rate outlook lies.   

Technical

The XAUUSD has traded in a firm uptrend, with the spot price well over its 100-day moving average and trading within an ascending channel pattern. Support was established from a higher low at the 1954.85 level, while a rejection of the 2031.98 level formed resistance.

Following the rejection of resistance, the spot price retraced towards the 61.80% Fibonacci Retracement Golden Ratio at the 1984.12 level with precision. The volume decline towards the 1984.12 level signalled weakening bearish momentum and led to a bounce up as demand outweighed supply. With bullish traders on the front foot, they will likely aim for resistance at the 2031.98 level.

Alternatively, if upside price action is met with declining volumes, bullish pressure could be subsiding to give way to bearish traders shorting. Bearish traders will likely consider the Golden Ratio a short-term target if they commit to pulling down the spot price.

Summary

Traders currently bet on a 70% chance of another Fed Rate hike in May; however, the key to the Fed’s interest rate outlook will lie in today’s inflation reading and FOMC Minutes. If inflation aligns with the slightly depressed trend in the economy, represented by the ISM’s weaker manufacturing and services readings, another rate hike could become questionable. A breakout above the 2031.98 level could be critical in defining if bullish sentiment will prevail.

Sources: CME FedWatch Tool, Reuters, TradingView