Gold are showing higher from yesterday itself and hitting daily highs today. In quieter summertime trading, the metals market bulls are awaiting some kind of spark to break the markets out of their doldrums. The U.S. economic data point of the week yesterday saw the consumer price index report for May come in at up 0.6%, which was a bit higher than the 0.5% rise expected. Year-on-year the CPI rose to 5.0% in May versus April’s rise of 4.7%. And the report falls into the camp of those who think inflation could get too hot in the coming months.

On a near-term basis, the gold are placing more emphasis on the uptick in bond yields after the CPI report, and less on the bullish implications of rising inflation down the road. The weekly U.S. jobless claims report showed a drop in claims in the latest period, which was also deemed a bit negative for the safe-haven metals. The global marketplace remains calm at present, amid no major geopolitical flareups in play and some typical summertime trading occurring.

What has possibly flown under the radar screen of many in the marketplace recently is the quiet, steady decline in U.S. Treasury yields, which this week dropped to more-than-three-month lows. The yield on the benchmark 10-year U.S. Treasury note is presently fetching 1.52%. Rising raw commodity prices and some supply shortages, combined with major economies busting out of their pandemic shackles, have raised the specter of rising and possibly problematic price inflation in the coming months. However, the big element that does not jibe with the steepening inflation theory is U.S. government bond yields that remain near historically low levels. The stubbornly low U.S. bond yields support the Federal Reserve’s assertions that the rising trajectory of inflation is only transitory.

Expectations that the Fed will maintain its accommodative monetary policy stance, even though the US inflation ran hotter than the forecasts, keeps the bullish undertone intact around gold price. Treasury yields dropped alongside the US dollar in the aftermath of the CPI report, as the Fed is still likely to consider the price rise as transitory.

XAU/USD 4 Hour Chart:

Support: 1879.5 (S1), 1859.5 (S2), 1849.4 (S3).

Resistance: 1909.6 (R1), 1919.8 (R2), 1939.7 (R3).

With all the mentioned catalyst, yellow metal is showing the bullish trend. We expect a bullish trend for XAU/USD.