PPI rises, but GOLD is supported by USD and Yields

Updated

XAUUSD remained strong as the Dollar and US Treasury yields weakened, although data showed US producer prices rose more than expected in April, suggesting inflation remained high.

Federal Reserve Chairman Jerome Powell said Tuesday that his confidence that inflation will continue to cool is no longer as high as it was at the beginning of the year and that the Fed needs to be patient before cutting interest rates.
“I would say (the producer price index) is actually quite mixed,” Powell said.
As for when the Fed will cut interest rates, Powell noted that the Fed's current restrictive stance may take "longer than expected to take effect and reduce inflation."
“I do think the real issue is keeping policy at current interest rates longer than expected,” Powell said.

According to the latest producer price index (which measures the price of goods produced by manufacturers), wholesale prices rose 0.5% month-on-month in April, above the market consensus of 0. 3%.
Excluding the volatile food and energy categories, "core" PPI also rose 0.5% in April, exceeding expectations for a 0.2% increase.
However, it is worth noting that the monthly price increase in March was revised down to 0.1% from the initial increase of 0.2%.

U.S. producer prices rose more than expected in April as the cost of services and goods rose sharply, prompting traders to cut bets on the first interest rate cut in September.
As a basic rule, the newly released PPI data is not beneficial for gold prices. However, because the Dollar and US Bond Yields faked together, gold was chosen and increased in price.

According to CME "Fed Watch" data, the probability of the Fed keeping interest rates unchanged in June is 96.7% and the probability of cutting interest rates by 25 basis points is 3.3%.

Gold is considered a hedge against inflation, but higher interest rates increase the opportunity cost of holding non-yielding gold.
The focus now turns to US consumer price data due today (Wednesday), which could provide clearer guidance on Federal Reserve interest rate cuts this year .

Fed is "hawkish", GOLD corrects and stays above EMA21

Analysis of technical prospects for XAUUSD
Gold has increased significantly after receiving support from EMA21, which readers noticed in previous publications. However, the gains were limited by the price channel with an important resistance level noted at 2,366USD.

In the short term, if gold breaks and rises above the $2,366 technical level it will be eligible for further upside with confirmation of a bearish channel being broken above. This means that open short positions should be reasonably protected behind the $2,366 level.

On the other hand, at the time this publication was being completed, gold was still trending down from the price channel, with a new downtrend to be opened if gold managed to fall below the EMA21, confirmed by a drop below 2,330USD level, then the target level is noticed at the 0.236% Fibonacci point.

In the short term, gold still tends to decrease in price and the bullish case is noted by readers above. Below are the notable technical levels for the day.
Support: 2,335 – 2,330USD
Resistance: 2,360 – 2,366USD

🪙SELL XAUUSD | 2393 - 2391

⚰️SL: 2397

⬆️TP1: 2386
⬆️TP2: 2381

🪙BUY XAUUSD | 2321 - 2323

⚰️SL: 2317

⬆️TP1: 2328
⬆️TP2: 2333

Note

Today, the US CPI for April will be released, which could provide further indication of when the Fed will start cutting interest rates. In addition, US retail sales in April will also be announced along with detailed information on consumer spending trends. Hotter-than-estimated inflation data could prompt a more hawkish stance from the Fed, which would boost the USD and pressure gold prices.

Note

🔼GOLD reaches this level before the US inflation data is revealed

Gold prices rose during these moments of trading, today, Wednesday, as investors looked forward to reading inflation data in the United States that could provide evidence on the path of reducing interest rates by the Federal Reserve.

Note

CPI continues to push, new short uptrend, raw price $2,400

Note

Fed Chairman Jerome Powell said the labor market is strong but is also gradually cooling. Fed policymakers are trying to tamp down inflation by weakening demand across the economy and looking for more signs that the labor market is easing.

Note

New York Fed President John Williams acknowledged a positive turn this week as April CPI data was lower than expected and retail sales did not increase during the month. However, the data has not yet prompted policymakers to say anything concrete about when interest rates might fall, as Fed Chairman Jerome Powell said earlier this week that although the underlying outlook for inflation The decline in inflation remains intact, but the Fed isn't entirely confident about it after three months of disappointing inflation data.

Note

Gold prices climbed to a record peak, stabilizing around 2,437 USD/oz amid increasing geopolitical tensions

XAU/USD accelerated on Monday. Gold prices hit a record peak of nearly $2,441 during the Asian session amid growing expectations of interest rate cuts from the Fed and rising geopolitical tensions in the Middle East. Meanwhile, escalating tensions between Russia and Ukraine also fueled demand for safe-haven assets, with both countries carrying out attacks over the weekend.

Note

🟡Gold slides from record high amid dollar stability

Global gold prices declined during these moments of trading, today, Tuesday, after reaching a new record peak reached in the previous session due to growing bets on lowering US interest rates and geopolitical risks that drive demand for safe havens.

Note

Yesterday was a fairly calm day for the USD as yields gradually recovered after the CPI report and although the market did not seem too worried, Fed officials were not. Algorithmic hedge funds continue to short USD but real money funds have started buying again.

Note

Despite a slight downward trend during the day, gold prices generally maintained a positive picture. On the 4-hour chart, XAU/USD has formed a rising price channel since early May. Technically, the precious metal still maintains a positive outlook as it holds above the 100-period EMA.

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