Gold Price Forecast: XAU/USD rises to test $1,970 after US CPI

• The US annual CPI dropped in May to 4%, which is the lowest since March 2021.
• The US dollar fell across the board, and no rate hike is expected on Wednesday from the Fed.
• XAU/USD has a bullish momentum but is still limited by $1,970.

Gold Price bounced sharply from $1,950 to the $1,970 area following the release of US inflation data. It is trading near daily highs, supported by a broad-based decline in the US dollar.

The US Consumer Price Index rose 0.1% in May, which was below the expected increase of 0.2%, and the annual rate fell from 4.9% to 4.0%, reaching the lowest level since March 2021. The Core CPI advanced 0.4%, in line with expectations, and the annual rate fell from 5.5% in April to 5.3% in May.

These numbers have cemented expectations of a pause on Wednesday from the Federal Reserve. More inflation data is due tomorrow with the Producer Price Index. After the CPI numbers, US yields dropped sharply and the US dollar tumbled. The 10-year yield fell from 3.74% to 3.69%, and the DXY hit three-week lows near 103.00.

XAU/USD jumped to test the $1,970 resistance area but failed to break higher and pulled back. If it surpasses that level, more gains could be seen, targeting initially $1,975 and then June highs at $1,985. On the downside, support emerges at $1,950 followed by $1,938.

Technical levels