- Gold boosted by April’s unexpected PPI drop fuels Fed rate cut speculation.
- Retail Sales slow sharply to 0.1% as tariffs weigh on consumer spending, hinting at broader economic softness.
- Fed rate cut expectations rise to 53 bps for 2025; DXY dips 0.15% to 100.88, supporting Gold recovery.
Gold prices recovered some ground earlier on Thursday during the North American session after US economic data suggested that factory gate inflation continues decelerating. At the same time, consumer spending was debilitated due to US tariffs. At the time of writing, XAU/USD trades at $3,202, up by 0.82%.
XAU/USD gains 0.82% after weaker inflation and spending data revive easing hopes, lifting Bullion off five-week low
After diving to a five-week low of $3,120, the non-yielding metal found bids that pushed Bullion back above $3,200. Data from the United States (US) showed that the Producer Price Index (PPI) in April fell unexpectedly by 0.5% MoM, missing an estimated 0.2% increase. The core PPI dropped by 0.4%, below forecasts of a 0.3% expansion.
At the same time, Retail Sales for the same period slowed, edging up by 0.1% MoM, after March’s figures were upwardly revised to 1.7%. Economists had expected the numbers to remain unchanged compared to the previous month.
Initial Jobless Claims for the week ending May 10 rose by 229,000, as expected, unchanged from the previous week.
XAU/USD edged up after the data, and so far, bulls have reclaimed the $3,200 figure, as the Greenback, as measured by the US Dollar Index (DXY), fell 0.15% to 100.88.
Market participants increased their bets that the Federal Reserve (Fed) will ease policy by 53 basis points (bps) in 2025, up from the 48.5 expected on Wednesday.
The de-escalation of the US-China trade war impacted the bullion price amid improved risk appetite. Gold fell from around $3,326 to $3,207, resulting in a loss of over $120. However, it has since recovered, as US data reflects a sluggish economy.
Ahead in the week, the US economic docket will feature further Fed speaking and the University of Michigan (UoM) Consumer Sentiment.
XAU/USD Price Forecast: Technical outlook
From a technical standpoint, Gold’s bounce could be short-lived if buyers fail to achieve a daily close above $3,200. In that case, they must surpass the May 14 peak of $3,257 to remain hopeful of testing $3,300 and trimming weekly losses. Nevertheless, momentum favors further downside, as depicted by the Relative Strength Index (RSI). With that in mind, traders should be warned that the ongoing leg-up could be a correction of an ongoing downtrend.
On the flipside, if XAU/USD closed on a daily basis below $3,200, further downside is seen, with the 50-day Simple Moving Average (SMA) at $3,155 seen as the next support level, ahead of $3,100.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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