XAU/USD gallops to near $1,950 as US inflation softens beyond expectations

• Gold price has climbed strongly to $1,950.00 as US inflation has softened more than expectations.
• The US Dollar Index has plunged as the Fed would have the luxury of skipping interest rates further.
• Gold price is expected to deliver an Inverted H&S breakout after surpassing the neckline plotted around $1,940.00.

Gold price (XAU/USD) has displayed a stellar run as the United States Bureau of Labor Statistics has reported softer-than-expected June Consumer Price Index (CPI) data. The monthly headline and core inflation has reported a pace of 0.2% while investors were anticipating a higher velocity of 0.3%.

Annualized headline CPI has softened to 3.0% vs. the consensus of 3.1% and the former release of 4.0%. While annualized inflation has decelerated to 4.8% against the estimates of 5.0% and the prior release of 5.3%. More-than-anticipated cool-down in inflationary pressures would trim expectations of an interest rate hike by the Federal Reserve (Fed) in its July monetary policy meeting.

Meanwhile, S&P500 futures have jumped strongly as soft inflation figures have eased fears of a recession in the United States. The US Dollar Index (DXY) has demonstrated a vertical fall to near the crucial support of 101.00. The yields offered on 10-year US Treasury bonds have sharply dropped to 3.88%.

Going forward, investors will focus on Thursday’s Producer Price Index (PPI) data. As per the consensus, monthly PPI is expected to register a pace of 0.2% vs. a contraction of 0.3%. It looks like a mild recovery in gasoline prices has propelled factory gate prices.

Gold technical analysis

Gold price is gathering strength to deliver a breakout of the Inverted Head and Shoulder chart pattern formed on a two-hour scale. A breakout of the aforementioned chart pattern will result in a bullish reversal. The neckline of the chart pattern is plotted around June 21 high at $1,940.00.

The 20-period Exponential Moving Average (EMA) at $1,932.90 is providing cushion to the Gold bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has confidently shifted into the bullish range of 60.00-80.00, which indicates that the bullish momentum has been triggered.

Gold two-hour chart