Gold prices advanced on Tuesday, with spot XAU/USD reaching a one-month high above $1978 an ounce, as the greenback weakened following the release of the U.S. consumer price index.
U.S. consumer prices rose at the fastest pace since late 1981 in March at 8.5% year-over-year, while prices excluding food and energy costs (core CPI) rose at an annualized 6.5%. The dollar retreated versus most rivals, moving in tandem with a pullback of yields across the curve despite inflation figures reinforcing the case for a 50 bps rate hike by the Fed at its next meeting in May.
However, this outcome was widely expected and priced in, which could have triggered a correction in the dollar. At the same time, the precious metal continues to benefit from the risk-off environment, while record CPI figures could have prompted investors to seek a hedge against inflation in gold.
XAU/USD is climbing for the fifth day in a row, having printed a high of $1978.68 an ounce, last seen on Mar. 14. According to indicators in the daily chart, the technical perspective for XAU/USD remains positive while the price holds above its main moving averages.
Both the MACD and the RSI stay in positive territory, gaining bullish slopes and reflecting increasing buying momentum. There are no signs of exhaustion yet, leaving room for further advances. On the upside, the next target for XAU/USD bulls is seen at the $1990-$2000 area, followed by the recent high of $2070.
On the other hand, short-term support could be offered by the 20-day SMA, currently at the $1935 zone, followed by the $1890 area, where the 61.8% retracement of this year’s rally lies.