Gold prices are rising and refreshing monthly highs above $2,400

Gold breaks above $2,400, approaching an all-time high of $2,431.
Lower April inflation in the US supports the escalate in gold prices, despite rising treasury bond yields.
Fed officials remain cautious, and expectations for interest rate cuts in December 2024 have been revised slightly to 35 basis points.

The price of gold surged during the pre-weekend North American session as XAU/USD traded above $2,400, rising more than 1.5% amid higher US Treasury yields. The volatile metal extended its rise and threatened to exceed the record high of $2,431.

A lower April inflation reading in the United States (US) pushed the price of gold above the $2,400 level, even as US Treasury yields rose. However, the dollar is weakened overall and is down about 0.03% at 104.45, according to the US Dollar Index (DXY).

This has revived speculation that the Federal Reserve (Fed) may cut interest rates in 2024. Fed officials stressed, however, that one positive inflation reading is not enough, as most regional Fed governors maintain a cautious stance.

According to the December 2024 Federal Funds Rate Futures Contract, expectations that the Fed would cut interest rates dropped from 36 basis points (bps) to 35 basis points by the end of the year.

Daily market update: Gold price ignores Fed’s hawkish comments to keep rates higher

Gold prices rose despite higher US Treasury yields and a weaker US dollar. American 10-year treasury bonds yield 4.42% and are four and a half basis points (bps) higher than the opening level. DXY fell 0.04% to 104.40.
According to the U.S. Bureau of Labor Statistics (BLS), U.S. inflation returned to a downward trend on Wednesday after six months of stagnation. The core consumer price index (CPI) fell from 3.8% to 3.6% y/y in April, reducing pressure on the Fed. This and feeble retail sales have increased the chances of Fed expectations for interest rate cuts.
Following the data, US stocks rose to fresh all-time highs, while the US dollar fell sharply, tracking the path of US Treasury yields.
Richmond Fed President Thomas Barkin acknowledged that inflation was falling but stressed that reaching the Fed’s target “will take longer.”
Cleveland Fed President Loretta Mester approved the latest CPI data, noting that the Fed’s current monetary policy stance is appropriate as the Fed continues to evaluate upcoming economic data.
Fed Governor Michelle Bowman said policy is tight but she is prepared to raise interest rates if inflation stalls or reverses.

Technical Analysis: Gold price will extend its rise to $2,500

The bullish sentiment in gold prices remains unchanged as the gold metal has returned to an upward trend. Gold buyers are gaining strength with momentum on their side as the relative strength index (RSI) remains in bullish territory.

Therefore, the most likely scenario is that XAU/USD may test the all-time high of $2,431. After clearing, the next stop will be the $2,450 level, followed by the psychological number of $2,500.

Conversely, if XAU/USD falls below $2,400, it could expose the May 13 low of $2,332, followed by the May 8 low of $2,303. Once these levels are broken, the next level will be a 50-day elementary moving average (SMA) at $2,284.