Gold Price Holds Below $2650 Amid Modest USD Uptick: US PPI in Focus for Fresh Impetus
Gold prices remain stable, hovering below the $2,650 mark as the precious metal benefits from a modest USD uptick. Investors look to the upcoming US Producer Price Index (PPI) data for new market drivers. Despite the rise in US Treasury bond yields, which supports the US Dollar, gold has managed to attract positive momentum for the second consecutive day.
Gold Price Sees Positive Traction Amid Bets for Fed Rate Cuts
Gold prices (XAU/USD) have gained traction for the second straight day as market participants expect the Federal Reserve (Fed) to continue with rate cuts. This recovery comes after gold touched a near three-week low at $2,602 on Thursday. A weaker labor market, highlighted by a surge in US weekly jobless claims, reinforces the view that the Fed may continue its easing policy, adding to the precious metal’s positive outlook.
The non-yielding yellow metal benefits from a softer risk tone in the market. The signs of weakness in the labor market contributed to a modest decline in US Treasury bond yields, which further support gold’s upward trajectory. These factors have allowed the precious metal to recover much of its recent losses.
Mixed US Economic Data and Its Impact on Gold Prices
The recent release of stronger-than-expected US consumer inflation data complicates the Fed’s monetary policy outlook. The data showed that the headline Consumer Price Index (CPI) rose by 2.4% year-on-year in September, while the core CPI, which excludes food and energy prices, increased by 3.3%. These figures dampened hopes for an aggressive rate cut by the Fed in November.
As a result, the US Dollar rallied to a near two-month high before retreating slightly. This firming of the USD may limit any significant bullish momentum for gold, which often moves inversely to the US Dollar. Despite this, gold has managed to stage a partial recovery, as traders anticipate further action from the Fed and look to the upcoming US PPI data for fresh direction.
US Labor Market Weakness Supports Gold’s Safe-Haven Appeal
One of the critical factors driving gold’s recent gains is the deteriorating US labor market. The US Labor Department reported an increase of 33,000 in unemployment claims for the week ending October 5, bringing the total to a seasonally adjusted 258,000, higher than the expected 230,000. This data suggests that the US labor market is losing momentum, which may influence the Fed to continue its rate-cutting cycle.
The Fed’s focus on achieving maximum sustainable employment means that signs of weakness in the labor market could provide further support for gold as a safe-haven asset. The non-yielding nature of gold becomes more attractive when interest rates are cut, as lower rates reduce the opportunity cost of holding gold.
Softer Risk Tone Benefits Gold Despite USD Strength
Despite the recent strength of the US Dollar, which is typically bearish for gold, a softer risk tone in the market is helping the precious metal maintain its upward momentum. Investors are increasingly cautious about global economic growth prospects, particularly in light of China’s fiscal policy measures.
China’s finance ministry is expected to provide more details of its fiscal stimulus package over the weekend, which could influence global market sentiment. While these measures may improve the risk sentiment temporarily, they could also cap any significant upside for gold in the short term.
Technical Outlook: Gold Price Poised for Further Upside
From a technical perspective, gold’s rebound from the $2,600 level and its move above the $2,630 support zone is encouraging for bullish traders. The daily chart’s oscillators remain in positive territory, suggesting that the path of least resistance for gold is to the upside.
The next key resistance for gold is seen at the $2,657-$2,658 level, followed by the $2,670-$2,672 supply zone. If gold manages to clear these hurdles, it could challenge the all-time high of $2,685-$2,686, which was reached in September. A break above the psychological $2,700 level would confirm a continuation of the multi-month uptrend that gold has been following.
Key Levels to Watch: Resistance and Support Zones
- Resistance Levels: $2,657-$2,658, $2,670-$2,672, $2,685-$2,686, $2,700
- Support Levels: $2,630-$2,628, $2,600, $2,560, $2,535-$2,530, $2,500
The immediate downside for gold is protected by the $2,630-$2,628 region, which now acts as support. If this level is breached, gold could face further losses, potentially testing the $2,600 level. A sustained break below this level would signal a bearish trend, opening the door for a deeper correction towards the $2,560 and $2,535-$2,530 support zones. In an extreme bearish scenario, gold could drop to the $2,500 psychological support mark.
US PPI Data Could Drive Short-Term Gold Price Movements
Traders are now turning their attention to the US PPI report, which could influence demand for the US Dollar and provide fresh impetus for gold prices. The PPI data is a key indicator of inflation at the wholesale level and can have significant implications for the Fed’s interest rate decisions.
If the PPI data comes in stronger than expected, it could bolster the US Dollar and weigh on gold prices. Conversely, weaker-than-expected PPI data could reignite hopes for further Fed rate cuts, supporting gold’s safe-haven appeal and driving prices higher.
Gold Price at a Critical Juncture
Gold prices remain at a critical juncture as traders await further cues from the US economic data. While the Fed’s rate cut bets and a softer risk tone are supporting gold’s recovery, the US Dollar’s strength may cap any significant gains in the near term. From a technical standpoint, gold needs to surpass key resistance levels around $2,670-$2,672 to resume its uptrend. The outcome of the US PPI report will be crucial in determining the next direction for the precious metal as it heads into the weekend.
