Throughout April, gold was encouraged by the prospects of accelerating inflation, but as soon as Janet Yellen started talking about a rate hike, the precious metal took a step back. It doesn't matter that Yellen no longer holds the post of chairman of the Federal Reserve System, that she has begun to make excuses for her oversight. There is no smoke without fire. And if the US employment statistics for April turn out to be no less impressive than the March figures, the Fed will be forced to think about curtailing monetary stimulus.

According to Janet Yellen, the central bank may have to raise rates to keep the economy from overheating. This announcement became a tub of cold water for US dollar sellers. Jerome Powell lulled their attention with the phrase that it is not yet time to say goodbye to QE, but here his predecessor is talking about more serious things. Subsequently, the Treasury Secretary noted that she respects the independence of the Fed and does not give them recommendations. However, the markets always hear what they want to hear. The idea of raising rates was in the air back in March, in April the Fed managed to convince investors, but in May they may again take up their own business.

Formally, the acceleration of inflation can become a pretext for monetary restriction. The Bloomberg Commodities Index, which tracks 23 positions, peaked in nearly a 10-year period, which JP Morgan and IHS Markit said drove global manufacturing prices to their highest peaks since 2009, and U.S. producer prices to the highest level since 2008. The cost of non-manufacturing goods and energy resources in the largest countries of the world rose by 4% in the first quarter, which is their fastest dynamics in three years. Inflationary expectations in the US are growing steadily.

Dynamics of inflationary expectations in the USA

At first glance, the acceleration of the CPI is a bullish factor for XAU/USD, because gold is traditionally perceived as a hedge against inflation risks. In fact, much of its fate depends on how the Fed treats the increase in the growth rate of consumer prices. If Jerome Powell and his colleagues consider this process a temporary phenomenon, a favorable environment is created for the rally of the precious metal. And vice versa. In this regard, the statement of the chairman of the Federal Reserve that the time for curtailing QE has not yet come naturally pushed gold up, but at the moment the markets believe that the views of the Central Bank may change.

It is unlikely that the XAU/USD bulls can be helped by the fact that, according to research by the China Gold Association, the consumption of precious metals in the country increased by 93.9% in the first quarter compared to the same period in 2020. The asset continues to be sold for a week in China at $8-$10 compared to spot market prices. On the contrary, due to the sad epidemiological situation in India, the demand for gold has fallen sharply.

Technically, a break of the resistance at $1,800 per ounce will activate the AB=CD pattern, the target of which corresponds to $1,875 at 261.8%, and will allow the formation of longs. On the contrary, a fall in gold below $1,750 will make you think about selling.

Gold, Daily chart