Gold spikes to 1-1/2 week tops, above $1320 on softer US CPI

   •  USD weakens further after both headline and core CPI miss estimates. 
   •  Retracing US bond yields offset risk-on mood and remain supportive.

Gold finally broke out of its daily consolidative range and spiked to 1-1/2 week tops during the early NA session.

The US Dollar extended its profit-taking slide and retreated farther from yearly tops after the latest US consumer inflation figures fell short of consensus estimates, which eventually boosted demand for dollar-denominated commodities - like gold. 

Both the headline CPI and core CPI rose less than expected in April and seems to have dampened expectations for a steeper Fed monetary policy tightening cycle. The same is evident from a sharp follow-through retracement in the US Treasury bond yields and further benefitted the non-yielding yellow metal.

Meanwhile, traders seemed to have largely ignored the prevalent positive trading sentiment around equity markets, which tends to weigh on traditional safe-haven assets, with the USD/US bond yield dynamics acting as key determinants of the precious metal's sharp spike above $1320 level.

Technical levels to watch

Immediate resistance is pegged near the $1325 region (100-day SMA), above which the commodity seems all set to head towards challenging the $1331-33 supply zone. On the flip side, $1315-14 area might now protect the immediate downside, which if broken could accelerate the fall back towards $1310 intermediate level en-route the very important 200-day SMA support near the $1306-05 region.