US Inflation Pressure Surges, Gold Falls Nearly $200 Over 4 Consecutive Days, Gold Price May Fall to $4,360

Latest data shows that the U.S. April CPI, released on May 12, rose 3.8% year-over-year, exceeding market expectations of 3.7% and marking the highest level since May 2023. Following this, the U.S. April PPI, released on May 13, surged 1.4% month-over-month—the largest monthly gain in four years—and its 6.0% year-over-year increase was also the strongest in over two years.

Following the data release, the market quickly pushed back rate cut expectations for the year and even began repricing the possibility of a rate hike by year-end. In this context, gold prices fell for four consecutive days; as of the Friday European session, gold had accumulated a decline of nearly $200 to $4,565.50, a weekly drop of nearly 3%.

From recent market trends, the focus has centered on the significant rise in U.S. inflationary pressures shown by the CPI and PPI data. The April PPI uptick was not limited to goods, as both service and commodity prices rose, indicating that imported inflation and cost pass-through are both at play. Meanwhile, the annual gap between April CPI and PPI widened to 2.2 percentage points, the largest since 2022, signifying that upstream price pressures are once again being transmitted downstream.

For gold, rising inflationary pressure pushes up U.S. Treasury yields and strengthens the dollar, increasing the opportunity cost of holding non-yielding assets. Data shows the 10-year U.S. Treasury yield approached a one-year high at 4.53%, and the dollar rose by more than 1% this week.

According to the CME FedWatch Tool, the probability of Fed rate cuts in 2026 has been significantly compressed, while the probability of a rate hike by year-end has risen to 38.4%.

Federal Reserve rate expectations, Source: CME FedWatch Tool

Kansas City Fed President Schmid stated on May 14 that inflation remains the most pressing risk to the U.S. economy, even mentioning that PCE reached 3.5% in March and could further approach 4% in April. This implies the Fed may maintain high interest rates (3.5%-3.75%) for a longer duration.

Gold price daily chart, source: TradingView

Looking at the daily chart, gold recently found support at $4,500 and staged a rebound, but failed to break above $4,800 effectively. Continued weakness under this resistance has led to a head-and-shoulders top formation in the daily candlestick structure, signaling a shift to bearish short-term sentiment. The initial target is a drop toward $4,360, breaking below the starting point of the left shoulder.

In terms of technical indicators, the moving average system shows that gold has broken below the 144-day moving average, indicating the medium-to-long-term bullish trend has been compromised. With short-selling momentum significantly strengthened, gold is set to enter a prolonged period of high-level volatile downward consolidation.

The Relative Strength Index (RSI) is currently near 40.30, reflecting bearish market sentiment. As it has not yet reached oversold territory, gold is likely to continue its decline in the short term.

Currently, gold is expected to maintain its downward trajectory in the short term, first testing key support at $4,500, where a minor rebound might occur. A high-volume break below this level would open up further downside toward the $4,360 support level.

For trading, it is recommended to primarily sell on rallies.

Support levels: 4,500, 4,360

Resistance levels: 4,588, 4,638

This content was translated using AI and reviewed for clarity. It is for informational purposes only.