Gold prices have stalled after recovering from their lows in mid-May. This movement was tracked in parallel with a rebound in the S&P 500 stock index - a measure of market risk appetite - while the US dollar corrected lower. The moderate view of the Fed's rate hike in 2023 seemed to be a major inspiration.
The beginning of June provided what may be a resumption of the previous trend, which saw the dollar rally as stocks and precious metals fell amid concerns about a rapid tightening. Fed fund futures now show two hikes next year, having been unsure of one just two weeks ago.
This puts the US CPI data for May in the spotlight. A moderate cooldown is expected in the pace of price growth: the core rate is expected to fall year-on-year to 5.9 percent, from 6.2 percent in April. The range of possible scenarios does not seem to bode well for the yellow metal.
If the CPI exceeds expectations, a strong shift in Fed rate hike expectations is likely to support the dollar while gold pulls back. A particularly large drop may provide some initial support, but such a move could also heighten recession fears as it will help the US dollar on the grounds of seeking refuge and pressure on counter-stock alternatives.
The inline score could also be problematic, as it offers an easier path to resuming pre-release trends that favor seeing steadier politics and a stronger US currency. Gold may manage slightly higher in the narrowly defined scenario as a modest decline in CPI larger than expected calms Fed fears without sounding alarms about growth.
Prices are slowing below the support-turned-resistance level at 1885.57. A breach of the uptrend line will establish a strong foothold above it, and then gold will target another support-turned-resistance at 1918.48 as a next obstacle on the way to the upside. This is followed by targeting the psychological level of $2000/oz.
Initial support holds 1830. Securing a daily close below this barrier would go a long way towards signaling a resumption of the downtrend prevailing from early March. Next, targeting below 1800 may come to challenge the mid-May bottom at 1787.03.