XAUUSD softer as US dollar firms in Tokyo

• XAU/USD eyes an upside to $1,980.00 amid uncertainty over a long weekend in global markets.
• The multi-decade print of US CPI has bolstered the odds of a jumbo rate hike by the Fed.
• The speech from Fed Chair Jerome Powell will keep investors busy this week.

Gold (XAU/USD) burst to life in the open and reached a fresh high of $1,988.51. The US dollar is also firmer following more hawkish comments from Federal Reserve officials who have reinforced expectations for faster US policy tightening.

As quickly as we are inching towards the announcement of the monetary policy by the Federal Reserve (Fed), which will happen on May 3-4, gold investors will react largely upon the guidance by Fed policymakers. Considering the recent dictations by the Federal Open Market Committee (FOMC) members, an interest rate decision of 50 basis points (bps) rate hike has received tremendous bets. To combat the soaring inflation, think tanks of the Fed believe that an aggressive interest rate hike by the Fed is highly required. Also, the guidance from the Fed should be hawkish considering the multi-decade high inflation figures and proactive requirement of reversion to neutral rates.

In the American session, investors will focus on the speech from the St. Louis Fed President and FOMC member James Bullard, which will provide insights into the likely monetary policy action by the Fed. However, the mega event will be the speech from Fed Chair Jerome Powell, which is due later this week.

”We are of the view that the Fed is broadly in-sync with the move toward the vicinity of neutral by the end of 2022, with Governor Brainard supporting that view recently. Chair Powell’s remarks in an IMF panel on the global economy will get the focus of the attention,” analysts at TD Securities explained. 

”While the Fed is signaling its intent to reach neutrality by year-end, and to start an aggressive QT regime, outflows from gold markets have been scarce as participants are happy to retain some optionality against the Fed’s stated plan amid growth concerns,” the analysts added. 

Meanwhile, as day 50 of the Ukraine crisis was supposed, there are still no signs of progress in peace talks between the two nations. Reuters reported that the Ukrainian Foreign Minister Dmytro Kuleba said there had not been any recent diplomatic communications between Russia and Ukraine at the level of their foreign ministries and that the situation in the port of Mariupol, which he described as “dire”, may be a “red line” in the path of negotiations.

Gold Technical Analysis

The bulls are in control and taking on fresh highs. On a daily scale, XAU/USD has tested the breakout of its previous critical level at March 24 high $1,966.18 multiple times. The 20- and 50-Exponential Moving Averages (EMAs) are scaling higher, adding to the upside filters. The momentum oscillator Relative Strength Index (RSI) (14) has overstepped 60.00, which indicates a firmer bullish momentum going forward.

Gold daily chart