Commodity Market: Gold rises as US Dollar softens, but recent macro data curbs gains

Spot Gold extended a rebound from this week’s low on Friday due to a softer US Dollar, but gains were limited by key macroeconomic data that bolstered the case of a sooner-than-anticipated increase in interest rates.

This week’s macro data showed a sharper-than-expected surge in US consumer prices in April and initial jobless claims hitting a 14-month trough. The data heightened inflationary concerns and added to prospects of a rate hike. Higher interest rates usually bolster the opportunity cost of holding Gold.

“Inflation is not necessarily bad for gold, however, it’s bad if the central banks start to act on it, and the market is getting a little bit jittery thinking that this could bring forward the U.S. Federal Reserve’s taper a little bit,” Stephen Innes, managing partner at SPI Asset Management, was quoted as saying by Reuters.

“Right now we haven’t had any inclination that the Fed is about to move anytime soon, I think gold still remains relatively supported,” Innes added.

The Federal Reserve had said that borrowing costs would be kept low until the US economy reaches full employment and inflation rate is set to “moderately” exceed the bank’s 2% inflation objective for some time.

As of 9:01 GMT on Friday Spot Gold was edging up 0.48% to trade at $1,835.33 per troy ounce, while rebounding from yesterday’s low of $1,808.87, or its weakest price level since May 6th ($1,782.05 per troy ounce).

The precious metal has gained 3.57% so far in May, following another 3.78% surge in April.

Meanwhile, Gold futures for delivery in June were gaining 0.61% on the day to trade at $1,835.20 per troy ounce, while Silver futures for delivery in July were up 1.08% to trade at $27.350 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.21% to 90.523 on Friday. The DXY slipped as low as 89.982 on May 11th, which has been its weakest level since February 25th (89.683).

In terms of macroeconomic data, today Gold traders will be paying attention to the April reports on US retail sales and industrial production due out at 12:30 GMT and 13:15 GMT respectively.

Near-term investor interest rate expectations were little changed. According to CME’s FedWatch Tool, as of May 14th, investors saw a 91.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 15th-16th, up from 90.0% on May 13th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,821.41
R1 – $1,833.95
R2 – $1,841.38
R3 – $1,853.92
R4 – $1,866.46

S1 – $1,813.98
S2 – $1,801.44
S3 – $1,794.01
S4 – $1,786.59