Gold Eyes $2000 As T-Yields Retreat Post-CPI Data

Gold has hit near one-month highs on Tuesday at just under $1980 and is on course for healthy on-the-day gains. The precious metal was supported as US yields pulled back in wake of evidence of easing Core CPI pressures. Gold bulls will now be eyeing a test of the $2000 level.

Gold prices are set to end the day firmly on the front foot just to the south of the $1970 level, having jumped to fresh near one-month highs earlier in the session near $1980. XAU/USD is currently trading with on-the-day gains of about 0.7%, taking weekly gains to more than 1.0%.

Powering the move higher was a pullback in US yields in wake of a not as hot feared US Consumer Price Inflation report that, although showing headline price pressures hitting a four-decade high at 8.5% YoY in March, showed some evidence of a slow down in core price pressures. Lower yields reduce the “opportunity cost” of holding non-yielding assets like gold.

Though Fed Vice Chair Lael Brainard followed up the release of the inflation data a message that the Fed would be pressing ahead with monetary tightening anyway, markets seem to have dialed back on expectations for the pace of Fed tightening in the latter half of this year.

Gold also derived support from geopolitics, after Russian President Vladimir Putin referred to Russo-Ukraine peace talks as being at a dead-end, dampening hopes of a ceasefire. Now that spot gold prices have broken convincingly above late March highs in the $1960s, the gold bulls will set their sights on the $2000 level once again.

But further Fed commentary this week and US Producer Price Inflation data on Wednesday could present downside risks, particularly if Fed policymakers continue the hawkish chatter and producer prices don’t also moderate as expected. That might send US yields higher, which could stymie gold’s advances, though traders note that gold has been unusually resilient in the face of rising yields in recent weeks.