(Kitco News) – This week’s key CPI and PPI inflation numbers could prompt the Federal Reserve to cut rates earlier than forecast, which could trigger the next leg up for the gold rally, according to analyst James Hyerczyk at FX Empire.
“Gold prices rose on Tuesday as concerns over trade tensions drove safe-haven demand,” he wrote. “The US dollar index slipped to a four-month low, making gold more attractive to overseas buyers. Traders are now focused on upcoming US inflation data, which could influence Federal Reserve policy expectations and impact gold’s outlook.”
Hyerczyk said market sentiment remains cautious even as U.S. trade policies create further uncertainty. “President Donald Trump’s shifting stance on tariffs—imposing and then delaying duties on Canada and Mexico while increasing tariffs on Chinese goods—has unsettled global markets,” he said. “China and Canada have retaliated with tariffs of their own, adding to economic uncertainty.”
The President has also mused about the possibility of the U.S. entering a recession, which has contributed to investors’ fears. “Treasury Secretary Scott Bessent described the current economic phase as a ‘detox period’ due to federal spending cuts, while some analysts question the likelihood of a downturn,” Hyerczyk said. “This mixed outlook has kept gold supported as investors seek safety in volatile market conditions.”
All of this only raises the stakes for this week’s key inflation metrics, with Wednesday’s Consumer Price Index (CPI) report expected to show inflation moderating. “A softer reading could increase expectations of Fed easing, boosting gold demand, while a stronger-than-expected number may pressure prices lower,” he said. “The Producer Price Index (PPI) data on Thursday will also provide further insights into inflation trends.”
Hyerczyk said the market is now pricing in a potential rate cut in June, which would support higher gold prices. “However, if inflation remains persistently high, the Fed may be forced to maintain higher interest rates, which would limit gold’s upside as it yields no interest,” he said.
Looking at fixed-income markets, Hyerczyk noted that Treasury yields were little changed on Tuesday, reflecting the prevailing economic uncertainty. “The benchmark 10-year Treasury yield remained steady at 4.219%, while the 2-year Treasury yield hovered around 3.9%, near its lowest level since October,” he wrote. “Concerns over slowing growth and recent comments from Trump and his administration have fueled speculation about a potential economic downturn.”
“Despite recession fears, some analysts argue that key economic indicators—such as strong payroll numbers and steady consumer spending—do not yet justify panic,” he added. “However, any signs of economic weakness in upcoming data releases could increase demand for gold as a hedge.”
Turning to the gold price forecast, Hyerczyk said that the yellow metal remains well-supported, but the upcoming inflation data will likely drive short-term price action. “If CPI data signals easing inflation, gold could see further upside as rate cut bets strengthen,” he said. “Conversely, a higher-than-expected inflation reading may push bond yields higher, pressuring gold.”
In terms of the technical picture, he noted that spot gold “continues to straddle a pair of pivots at $2910.32 and $2895.25” with the price action suggesting “investor indecision and impending volatility.”
Hyerczyk wrote that a successful breakout above $2930.54 would indicate the return of buyers, which could provide the necessary momentum to challenge the $2956.31 all-time high in the spot market. Conversely, the absence of buyers or further profit-taking “could trigger a labored break with potential support pivots at $2864.26 and $2841.43.”
“The major support is the 50-day moving average at $2811.04,” he noted. “This indicator has been controlling the uptrend since January 8.”
“For now, the outlook leans bullish, with gold likely to remain well-supported unless inflation forces the Fed to maintain restrictive monetary policy,” Hyerczyk concluded. “Traders should closely monitor CPI and PPI data, as well as any shifts in rate expectations, for the next significant move in gold prices.”
Spot gold traded as low as $2,880.25 overnight, but renewed tariff threats from Trump during the North American trading session have since propelled the price well above the $2,900 level.
Spot gold last traded at $2,916.61 for a gain of 0.94% on the daily chart.
