Gold prices climbed to their highest level in four months as they touched $1,891.25 yesterday, supported by growing US inflationary pressure; however, recovery in the US dollar index capped the gains.
Also, US treasury yield rallied after a hawkish tone from Federal Reserve policymakers when they hinted at a possible shift in future policy.
Gold is trading near $1,871 which is sharply higher from the March 2021 low of $1,673.30, however prices fell back from a recent high after the dollar index bounced to 90.12 after registering a low of 89.68 yesterday, also US 10-year bond yield recovered, and is sustaining near 1.666 from the recent low of 1.469 registered on May 7.
The Fed meeting minutes suggest that some Fed members favoured talk of tapering asset purchases at upcoming policy meetings, which is likely to reduce liquidity in the system and is negative for gold prices.
Also, St. Louis Fed President Bullard said that the US has a "big economic boom going on," and he wouldn't be surprised if the U.S. 2021 GDP estimate of 6.5% is raised, these comments were negative for gold prices.
On the economic data front, Japan’s March industrial production revised downward at 1.7% m/m from the previously reported +2.2% m/m which is positive for gold.
However positive economic data from Eurozone is likely to reduce safe-haven demand for gold. EU Apr new car registrations surged +218.6% y/y to 862,000 which is indicating robust economic activity in the Eurozone.
Eurozone CPI report was also negative for gold demand after The Eurozone April core CPI was revised slightly lower to +0.7% y/y from +0.8% y/y. A drop in inflation reduces gold demand which is used as a hedge against inflation.
Gold prices are likely to face stiff resistance near $1,908-$1,926 however it may find an immediate support level around $1,857-$1,819