Gold prices experienced a rebound on Wednesday, reversing a portion of Tuesday’s 1.1% decline, which was triggered by hotter-than-expected US inflation data. The unexpected inflation figures momentarily dampened expectations for a rate cut in June.
The recent uptick in gold prices suggests that market participants, after analyzing the inflation data, believe that elevated inflation levels will not significantly alter current expectations for the initiation of monetary policy easing.
Despite Tuesday’s decline, gold found support above the initial level at $2141, which coincides with the former record high of December 4th. This support, coupled with other signals indicating a shallow correction, indicates that bulls are likely to regain control, as the overall technical picture remains firmly bullish.
For a sustained recovery, a daily close above the $2170 zone is required. This zone includes the 5-day moving average and represents near the 50% retracement level of the pullback from $2195 to $2150. Such a close would validate renewed bullish sentiment and signal a higher low at $2150.
However, it’s worth noting that the strong rally witnessed over the past three weeks, during which the metal gained over 8%, may lead traders to take profits, thus keeping the possibility of a deeper correction on the table.
In summary, while gold prices have rebounded, reflecting market confidence despite concerns about inflation, traders remain cautious amid the potential for profit-taking and the ongoing uncertainty surrounding monetary policy decisions.
