What to Expect in the New Month

Gold price has been on recovery from its Q1’21 losses in April. A decline in US treasury yields and US dollar have been key bullish catalysts for the precious metal. As we get into a new month, the bond yields dynamics will have a major impact on gold. As at Friday, the benchmark 10-year treasury yields were at 1.63. This is a rise from April’s low of 1.53. Fed’s dovish tone is likely to push the yields higher to and past 1.77; last reached at the end of March.

Gold price will also be reacting to inflation data. The Fed has insisted that the expected inflation will be transitory. However, investors looking to trade gold are still concerned that the impact of inflation will be more intense than the US central bank is keen on admitting. In addition to the rising bond yields, March’s core CPI reading came in at 0.3% compared to the forecasted 0.2%. April’s inflation data, which is scheduled for release on 12^th May, is expected to remain unchanged at 0.3%.

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Furthermore, the US retail sales are scheduled for release on 14^th May. Analysts expect the sales to have risen by 5.9%, down from March’s 9.8%. A better-than-expected number will be a bearish catalyst for gold price.

Gold Price Technical Outlook

After being on a downtrend for the most part of the first quarter, gold price got into the second quarter on a recovery mode. Over the course of April, the precious metal has had its price surge by about 3.80%.  It moves from a low of $1,680 on 31^st March to the April’s highest level of $1,797. However, in the past week, it pulled back and ended Friday’s session at $1,771.95.

As we get into a new month, gold price is trading between the lower and middle Bollinger bands. With the rising US treasury yields, the bears will be targeting the psychological $1700. Below that level, the next target will be at $1,677.40; which would be the metal’s lowest price since 31^st March. However, along its bearish path, it is expected to make several pullbacks and consolidations. $1,760, $1735, and $1720 are likely to be key support-turn-resistance levels.

Nonetheless, this thesis will be invalid if gold price moves past $1,780 to the upside. If that happens, it will probably be on range-bound trading as bulls gather enough energy to push it to and past the psychological $1,800 mark.