Gold is soaring on Fed’s less hawkish tone, falling T-yields

At the time of writing, gold price is hovering around $1,920 on Friday, hit a new 9-month high as investors anticipate the US central bank to adopt a less aggressive stance following Thursday’s softer inflation data. Bets for a 25-bps rate hike by the Federal Reserve lie at a 94.2% chance after the release of US inflation. The Gold Index is trading at $1,919.52, gains 1.20%, headed for a fourth consecutive week of gains.

Thursday’s US inflation report, which witnessed December’s Consumer Price Index (CPI) dropping beneath 7% and core CPI below 6%, was cheered by the financial markets. The dollar is staging a recovery though it’s been ignored by gold traders. The US Dollar Index, which tracks the buck’s value against a basket of peers, is trimming some of its weekly losses, gaining 0.18%, at 102.418.

The Gold Index is boosted by speculations of a less hawkish Fed as well as falling US bond yields. Global equities remain mixed, while Wall Street is headed for a soft opening. Earnings season began in the United States, with banks like Bank of America and JP Morgan topping expectations, while Wells Fargo missed estimates, as reported by Q4 results.

Another reason bolstering gold’s latest price action is US Treasury bond yields. The 10-year benchmark note rate tumbles one bps, down at 3.434%, though it has fallen 12 bps in the week.

The University of Michigan’s Consumer Sentiment for January beat estimates of 60.5 and reached 64.6. Regarding consumer inflation expectations, for one year, it dropped from 4.4% to 4%, while for a 5-year horizon ticked to 3% from 2.9%.

Technically; from a daily chart perspective, XAU/USD would likely continue to edge higher, as it has broken May 5, 2022, daily high of $1909.80. Oscillators like the Relative Strength Index (RSI) at overbought conditions but still beneath the 80-mark suggest the uptrend continues to gain strength. While the Rate of Change, portrays that buyers are gathering momentum.

Gold key resistance levels would be the April 29 high of $1,919.90, followed by April 18 at $1,998.39, slightly below $2,000.