After the release of US CPI data and retail sales, gold continued its upward trend

Wednesday (May 15) in the United StatesConsumer Price Index(CPI) and AprilRetail sales dataAfter the announcement,Spot goldPrices are higher. The data was lower than economists had expected, meaning the Federal Reserve could cut interest rates sooner than previously expected. Lower interest rates, or expectations, are good for gold because it reduces the opportunity cost of holding non-yielding assets.

After the release of US economic data, gold prices rose

The headline US consumer price index rose 0.3 per cent in April, down from an expected 0.4 per cent and 0.4 per cent in March. The 3.4 per cent year-on-year increase was in line with expectations and down from 3.5 per cent in March, according to the Bureau of Labor Statistics.

The U.S. CPI, which excludes food and energy, was in line with expectations, rising 0.3% month-on-month in April and 3.6% year-on-year, but still down from 0.4% and 3.8% last month.

Meanwhile, retail sales in the US fell well short of expectations in April, with growth of 0.0% in April, down from 0.6% in March, compared with a previous forecast of 0.4%, according to data released at the same time by the US Census Bureau. The drop in retail sales is another reminder of the US economy, which could further encourage Federal Reserve officials to consider cutting interest rates.

The disinflation and flat retail sales reflected in the CPI data could prompt the Federal Reserve to consider cutting interest rates in the short term, a move that would weigh on the dollar but be positive for gold.

Gold prices rose on the back of continued demand

Due to the continued safe-haven demand generated by geopolitics and global trade tensions, gold prices remained on the buying side.

International monetary fund (IMF) first deputy managing director Gita Gopinath said in a speech at Stanford University last week that central banks, especially in emerging markets, have been hoarding gold in recent years.    

"Some central banks may be buying gold because of concerns about sanctions risk," he said. "This is consistent with a recent study by the international monetary fund, which confirmed that reserve managers tend to increase their holdings in gold as a hedge against economic uncertainty and geopolitical risks, including sanctions risk."

This view is also supported by data from the World Gold Council (WGC), which shows strong demand for gold from central banks in 2024.

In light of the heightened tensions in the Middle East, Ukraine, and the increasingly polarized standoff between the BRICS countries and their US-led allies, this trend is expected to continue, supporting gold prices.

Technical analysis: Gold prices rebounded after falling behind

After finding support and resuming its short-term uptrend, gold prices have recovered to near the May high of $2,379.

(4-Hour chart of spot gold)

Given the old saying "the trend is your friend", gold prices are likely to continue moving higher, with the next target around $2,400, roughly at the April high. A break above the May 10 high of $2,378 would provide additional confirmation.