Gold prices retreat modestly but maintains upbeat outlook

Gold prices retreat modestly heading into the weekend due to US dollar strength and rising US yields, but the medium-term outlook remains constructive. The jump in yields coincided with the release of the University of Michigan US Sentiment survey, which showed consumer attitudes sinking to a six-month low of 57.7 in May.

However, the rise in medium-term inflation expectations, with the 5-year indicator up to 3.2% from 3.0% previously, may not be cause for concern or fundamentally alter the Fed’s monetary policy outlook. The case for the Fed to stop tightening at its June meeting remains strong. This could be bullish for gold, especially if rates reprice lower.

Gold prices could remain trapped in a narrow range until new evidence emerges to encourage further buying. Key tech thresholds to watch include the psychological $2,000 level, $1,975 and $1,920, and $2,050. If bulls manage to take out this ceiling, they may become emboldened to launch an attack on the 2023 highs. At the time of writing, the precious metal is trading at $2012.83 per ounce.