Gold Market Commentary - Monday, May 20

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Gold Breaks Highs

Gold prices are seeing strong demand on Monday with the futures market breaking out to fresh highs over early European trading. Following a brief correction lower across April, gold is resuming its upward trajectory and looks poised for further gains as traders start to shore up expectations for Fed easing in September. Last week, US CPI was seen cooling for the first time in six months which, alongside a drop in the jobs market and weaker growth data, has put Fed easing firmly back in traders focus. The market is now expecting the Fed to ease in September with at least one further rate cut this year in November or December.
 

US Data & Fed Speak

Looking ahead, traders will now be monitoring incoming US data as well as Fed commentary. If data continues to weaken, this will no doubt bolster easing expectations and lead USD lower near-term, allowing gold room to trade higher. We have plenty of Fed commentary due this week as well as the release of the FOMC minutes midweek. Traders will be looking to the minutes to see how much support there is for easing. Given the recent dip in inflation, any dovishness in the minutes should be firmly bearish for USD, creating further support for gold prices.
 

Technical Views

Gold

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The correction lower in gold found strong support into the 2275.43 level with the market since turning sharply higher again. Price is now testing above the 2427.54 level and with momentum studies bullish, looks likely to continue higher while we hold above 2364.93 near-term. 


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