- Gold edges lower towards $3,330 as a stronger US Dollar caps gains.
- The US-Russia summit in Alaska on Friday keeps sentiment fragile as Donald Trump warns of “very severe” consequences if Russia doesn’t halt the war in Ukraine.
- US PPI data shows inflation rising sharply in July, with both headline and core readings well above expectations.
Gold (XAU/USD) edges lower on Thursday, trading within the familiar range established earlier in the week as the US Dollar rebounds after upbeat Producer Price Index (PPI) and Weekly Jobless Claims data.
At the time of writing, the precious metal is hovering near $3,335 during the American session, down about 0.60% after marking an intraday high of $3,374.88 earlier in the Asian session.
July’s US Producer Price Index (PPI) surged 0.9% MoM, well above the 0.2% forecast and the flat reading in June, marking the largest monthly gain since June 2022. This lifted the annual rate to 3.3%, beating expectations of 2.5% and accelerating from 2.4% previously. Core PPI, which excludes food and energy, also rose 0.9% MoM, topping the 0.2% estimate and the prior month’s flat reading, pushing the yearly rate to 3.7% from 2.6% in June, above the 2.9% consensus.
Market sentiment is shaky ahead of Friday’s US-Russia summit in Alaska, with investors on edge over a possible geopolitical fallout. US President Donald Trump warned Wednesday that Russia will face “very severe” consequences if it doesn’t end the war in Ukraine, telling reporters at the Kennedy Centre that action will follow if Moscow refuses to agree to a ceasefire after his meeting with President Vladimir Putin, as reported by CNN.
While some market participants see the talks as an opportunity to ease tensions, others fear that an escalation could reignite safe-haven flows into Gold. A breakdown in dialogue would likely fuel fears of deeper geopolitical instability, especially if the US follows through on threats of retaliatory action against Russia.
Market movers: US Dollar strengthens, yields steadies with rate-cut bets building
- The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is recovering on Thursday after falling to a more than two-week low in the previous session. The index has climbed back above the 98.00 psychological mark following the release of stronger-than-expected PPI and steady Weekly Jobless Claims, as traders reassess the outlook for Federal Reserve rate cuts.
- US Treasury yields stabilise on Thursday after slipping on Wednesday, with the benchmark 10-year holding near 4.265% and the 30-year yield around 4.845%, as investors weigh stronger US inflation data against expectations of deeper Federal Reserve rate cuts before year-end.
- According to the CME FedWatch Tool, markets are now pricing in a 92% probability of a 25 basis point rate cut at the Fed’s September meeting, down from 99% before the PPI release but still sharply higher than around 60% a few weeks ago.
- Fed’s Musalem said on Thursday that he expects most of the impact of tariffs on inflation to fade within 6 to 9 months, though it could prove more persistent. He noted that tariffs are feeding through to inflation, and that he has revised his view of labor market risks slightly higher and inflation risks slightly lower. Musalem added that a half-point rate cut is not supported by the current state of the economy or the data.
- US Treasury Secretary Scott Bessent told Bloomberg TV on Wednesday that the Federal Reserve should be 150-175 basis points lower on rates. This followed his Fox Business interview late Tuesday, in which he urged a 50 bps cut in September, citing cooling inflation and revised weaker job data.
- Fed’s Austan Goolsbee said on Wednesday that upcoming Federal Reserve meetings will be “live” for policy decisions. He described tariffs as a “stagflationary shock” and expressed unease over the idea of a one-time price impact. Goolsbee noted that services inflation in the latest CPI report was “bad,” while describing the labor market as “pretty solid.” He added that slower job gains may reflect a drop in population growth rather than weakening demand and stressed that multiple months of favorable inflation readings are needed to gain the comfort required to cut rates.
- Fed’s Raphael Bostic said on Wednesday that the central bank has “the luxury” to wait before making a policy adjustment, given the strength of the labor market. He reiterated that he still sees one interest rate cut in 2025 as appropriate.
- US Initial Jobless Claims are expected at 228K, up from 226K previously, with Continuing Claims seen at 1.96 million, compared with 1.974 million earlier. July PPI is forecast to rise 0.2% MoM and 2.5% YoY, while core PPI is expected to rise 0.2% MoM and 2.9% YoY.
Technical analysis: XAU/USD stuck between $3,340-$3,370 as traders await US data
On a 4-hour chart, Gold (XAU/USD) is holding near the 100-period Simple Moving Average (SMA) near $3,352, while the 50-period SMA at $3,370 continues to act as immediate resistance.
Price action remains confined within the familiar range between $3,340 and $3,370, with repeated lower shadows on recent candles hinting at dip-buying interest.
However, bulls have yet to secure a sustained move above the upper boundary, keeping the short-term bias neutral unless Thursday’s Weekly Jobless Claims and PPI data provide a decisive catalyst.
A decisive break above $3,370 could pave the way toward the $3,400 psychological mark, while sustained rejection from this zone may trigger a pullback to the $3,340 support area. A breakdown below this level would expose the next psychological target at $3,300.
Momentum indicators paint a mixed picture. The Relative Strength Index (RSI) in the 4-hour chart is hovering around 46, signaling mild bearish momentum but no strong conviction, while the Moving Average Convergence Divergence (MACD) histogram shows signs of flattening after a recent bearish phase, with the signal line still marginally above the MACD line.
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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