Fundamental outlook of gold price trend: neutral

Gold continued its rebound momentum from the monthly low of 1851, as the Federal Reserve listed the default monetary policy path, but the upcoming CPI data may suppress the recent rebound of gold, as it is expected that inflation growth will slow down, or for the first time since August.

As the decline of gold since the beginning of the month failed to successfully push the RSI index (relative strength index) into the oversold range, the gold price seemed to have reversed before hitting the 200 day simple moving average (located near 1836).

As the Federal Open Market Committee (FOMC) does not seem to be in a hurry to reduce its balance sheet to the level before the pandemic, it is expected that gold is still expected to have a greater recovery in the next few days.

However, as the Fed normalizes its monetary policy, its efforts to fight inflation may bring negative risks to gold.

It is expected that the annual rate of CPI in the United States in April will slow to 8.1% from 8.5% recorded in March. If inflation does show signs of slowing down, it may be a drag on gold prices.

Signs of slowing price pressure will weaken the attractiveness of gold, as the FOMC will introduce higher interest rates in the coming months.

FOMC is expected to announce another 50 basis points interest rate increase at the June meeting, because "the committee decided to take necessary measures to restore price stability."

At the same time, even though Federal Reserve Chairman Jerome Powell insisted that "raising interest rates by 75 basis points is not a positive consideration of the committee", CME fed observation tool suggested that investors still believe that FOMC has a possibility of raising interest rates from the current range of 0.75%-1.00% to 1.50%-1.75%.

As the Committee normalizes monetary policy at a faster pace, speculation about the Fed's further shift to an exit strategy is expected to continue to limit gold prices.

Having said that, gold is expected to recover more significantly in the next few days, because the gold price seems to have rebounded before touching the 200 day SMA. However, the slowdown in US inflation growth may drag on gold as the Fed is trying to curb inflation.