US CPI Pours Water on Gold Bulls. Are We in for Pullback?

Gold prices have been rallying since the start of the year. It is up by more than 13% YTD. Saqib Iqbal, a financial analyst at Trading.Biz, predicted gold prices would go above $2300 in April 2024 and has now set a new target for the bullion.

• Gold prices, up by 13% YTD, could dip below $2300 if the Fed maintains a cautious approach, following pressure from the latest CPI data.

• Fed policy drives the gold rally, but strong inflation favors the dollar over bullion.

• A slew of factors can push the precious metal prices by the year’s end.?

He says, “March US CPI data has put the brakes on the disinflation story. The positive surprise of CPI data has put pressure on gold prices and it was expected as the Fed rate cuts are the main drivers of bullion rally this year. To see prices rise further, we need a rate cut by the Fed. If the US Fed continues its cautious approach to easing, gold prices risk a pullback below $2300 in May.”

Gold prices have been largely driven by Federal Reserve policy for the past year, and confidence that the Fed will pivot sooner rather than later has fueled the precious metal’s rally.

However, strong inflation data has raised concerns that US interest rates may remain high for an extended period. This is a positive situation for the US dollar but a negative for bullion.

Still, Saqib anticipates gold prices to rise this year as safe-haven demand remains strong amidst global uncertainty due to continuing wars and the forthcoming US election.

He forecasts an average of $2250 with a high of $2400 and a low of $2200 in 2024, given that the Fed begins to lower rates in the second part of the year, as well as dollar?and treasury yield falling, while geopolitical uncertainties persist.

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