Gold is trading stable after the inflation data report. The market is currently entering a 'new narrative' phase. If we were all talking about rate cuts, now the story has turned upside down. US inflation seems to be more "loose" than expected.
Yesterday, Wednesday, the market reaction to inflation data (CPI) showed one thing clearly, Fears of interest rate hikes have returned to haunt the trading desk. The current market situation has made investors start to dump risky positions and look back towards the Dollar.
April CPI: Probability of Interest Rate Hike
April CPI inflation data has just recorded the strongest monthly increase since 2023. What is more painful, the US wage growth rate fell into negative territory for the first time in three years.
Investors and traders who were previously confident that the Fed would implement a rate cut by the end of this year are now starting to bite their fingers. In fact, the probability of the Fed raising interest rates again before the end of 2026 has now jumped to 40%.
Gold Resilience
The gold trading trend since yesterday's CPI report has shown several changes in the 'new narrative' phase. Usually, when bond yield demand rises and the Dollar strengthens, gold will trade lower. This is a traditional 'correlative relation' to the gold market.
However, strangely, yesterday's gold fall was quite controlled and limited. This is not due to small speculators, but because of 'Commercial' and 'Non-Commercial' demand such as central banks and leading industrial countries, which still continue to unload gold into their reserves as a hedge against rising inflation risks.
Along with the increasing demand for the technology sector, global institutional gold demand seems to still be a 'support' that welcomes the fall in gold. Gold is one of the main components in the manufacture of semiconductors and AI chips.
Opportunity or Trap?
Current geopolitical pressures have previously limited the rise in gold prices. On the other hand, the US Dollar is seen as a 'safe haven' asset compared to this valuable commodity.
But will inflation risk and the probability of interest rate hikes by the FED successfully change the investor narrative towards Gold, which is often used as an inflation hedge asset?
The Retail Sales data report to be published tomorrow (May 14, 2026) and Core PCE next week are seen as the main triggers for price movements in this new narrative market situation.
XAU/USD Technical Analysis (Daily Chart)
Technically, XAUUSD is currently in a very critical pullback phase.
Current Bias: Bearish to Neutral (Short term)
Key Support: If the daily candle closes below the $4688.045 price level, it will indicate the risk of gold falling.
Immediate Resistance: The $4990.74 area is the next target if the $4803.738 price level is successfully broken.
Potential Breakout/Reversal: Gold needs a daily close above $4803 again to turn off the bearish narrative from yesterday's CPI data.
