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Gold price rallies after U.S. CPI comes in as expected

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(Kitco News) - Gold prices have erased modest overnight losses and are trading firmer early U.S. dealings Wednesday, in the immediate aftermath of a key U.S. inflation report that came in very close to market expectations. June gold was last up $7.80 at $2,050.70 and July silver was up $0.237 at $26.15.

The just-released U.S. data point of the week saw the April consumer price index come in at up 0.4% from March and up 4.9%, year-on-year. The CPI was expected to come in at up 0.4% from March and up 5.0%, year-on-year. CPI in March was up 5.0%, year-on-year. The April core CPI (excluding food and energy) was up 0.4% from March and up 5.5%, year-on-year, versus the forecast of up 5.5% and compares to up 5.6% in the March report. It appears the marketplace breathed a sigh of relief the inflation numbers did not come in hotter than expected. The CPI report falls slightly into the camp of the U.S. monetary policy doves, who want to see the Federal Reserve stop raising interest rates sooner.

Global stock markets were mixed to weaker overnight. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins and also erased modest overnight losses after the CPI report was released.

Meantime, President Biden on Tuesday afternoon met with House Speaker Kevin McCarthy and other congressional leaders to discuss raising or suspending the U.S. debt ceiling. No agreement was reached but the lawmakers and the president will meet again Friday. U.S. Treasury Secretary Janet Yellen recently said the U.S. government could run out of money by June 1 if the debt ceiling is not raised. As the month of May winds down and if no U.S. debt extension is agreed upon, general marketplace anxiety will ratchet up.

In other news, China is expanding its gold reserves and may be abandoning the U.S. dollar. Nigel Green of deVere Group says such may be occurring after news that China's gold reserves increased by 8.09 tons in April. Total gold stockpiles in China reached 2,076 tons after that nation added 120 tons in the five months through March. "Historically, China has been a major buyer of U.S. Treasuries, but this has seen a marked cooling off as Beijing swaps them out in favor of gold."

Gold's recent push near all-time highs was just a test run as Citigroup's Morse sees prices hitting $2,400

Green said this strategic move will limit China's dependence on the U.S. dollar, as trade and political relations with the U.S. deteriorate. "Buying gold rather than dollars may also signal moves by China that it is eventually seeking to replace the U.S. dollar as the world's reserve currency. Building stocks of the precious metal and allowing the Chinese yuan to be traded freely would weaken the U.S. dollar's dominance as the global reserve currency."

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil prices are near steady and trading around $73.50 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.46% and down a bit after the CPI report.

Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, real earnings, the monthly Treasury budget statement and the weekly DOE liquid energy stocks report.

Live 24 hours gold chart [Kitco Inc.]

Technically, the gold futures bulls have the solid overall near-term technical advantage. Bulls' next upside price objective is to produce a close in June futures above solid resistance at $2,100.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the April low of $1,965.90. First resistance is seen at $2,063.40 and then at $2,075.00. First support is seen at the overnight low of $2,032.00 and then at this week's low of $2,022.00. Wyckoff's Market Rating: 8.5

Live 24 hours silver chart [ Kitco Inc. ]

The silver bulls have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing July futures prices above solid technical resistance at $27.50. The next downside price objective for the bears is closing prices below solid support at $24.50. First resistance is seen at the April high of $26.435 and then at $27.00. Next support is seen at this week's low of $25.57 and then at $25.25. Wyckoff's Market Rating: 8.0.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.