News & Analyses

Gold gains ground ahead of US PPI data, Fed’s Powell speech

  • Gold price trades on a stronger note on Tuesday. 
  • Any signs of sticky inflation might further diminish expectations of US interest rate cuts this year, pressuring yellow metal. 
  • The US PPI report for April and Fed Chair Jerome Powell’s speech will be in the spotlight on Tuesday. 

The gold price (XAU/USD) rebounds despite the consolidation of the US Dollar (USD) on Tuesday. The upside of yellow metal might be limited as traders might wait on the sidelines ahead of key US inflation data this week. The higher-for-longer US rate mantra has exerted some selling pressure on the XAU/USD in recent sessions. However, the safe-haven flows due to escalating Middle East tensions might boost the gold price for the time being.

Investors will closely watch the key US economic data this week. The US Producer Price Index (PPI) for April is due on Tuesday, along with Fed Chair Jerome Powell’s speech. The attention will shift to the US Consumer Price Index (CPI), due on Wednesday. These reports could offer insights into the timing of the Fed’s initial rate adjustment. The hotter-than-expected inflation figures might dampen the prospect of a Fed rate cut, weighing on the precious metal. Higher interest rates may reduce overall investment demand for gold as they increase the opportunity cost associated with holding gold.

Daily Digest Market Movers: Gold price holds positive ground, all eyes are on the crucial US key inflation data

  • Fed vice chair Philip Jefferson called for holding interest rates at current levels until inflation shows more signs of easing, adding that he will continue to look for additional evidence that inflation is going to return to the 2% target. 
  • The Fed is likely to cut the Fed funds rate by 25 basis points (bps) in September, said 70 of 108 economists, while cutting rates by 50 bps in 2024, said 65 of 108 economists, according to the Reuters poll. 
  • On Monday, Israeli soldiers moved deep into the ruins of Gaza’s northern frontier to retake an area from Hamas rebels, while tanks and troops pushed a highway into Rafah, forcing Palestinian residents to flee, per Reuters. 
  • The US Producer Price Index (PPI) for April is expected to show an increase of 2.2% YoY, while the Core PPI figure is estimated to show an increase of 2.4% YoY in the same period. 
  • The US Consumer Price Index (CPI) inflation is forecast to ease to 3.4% YoY in April from 3.5% prior. Core CPI inflation is projected to drop to 3.6% YoY in April from 3.8% in March. 

Technical Analysis: Gold price maintains a positive outlook

The gold price edges higher on the day. The yellow metal keeps the bullish vibe unchanged as XAU/USD remains above the key 100-day Exponential Moving Average (EMA) on the four-hour chart. The upward momentum is reinforced by the 14-day Relative Strength Index (RSI), which is in the bullish zone at 52.70, indicating the support level is likely to hold rather than break. 

A high of May 10 at $2,378 acts as an immediate resistance level for the precious metal. Extended gains will pave the way to the $2,400 psychological level. A break above this level will see a rally to an all-time high near $2,432, en route to the $2,500 round figure. 

On the other hand, the crucial support level will emerge around the $2,325–$2,340 zone, portraying the confluence of the resistance-turned-support level and the 100-period EMA. The breach of this level will expose a low of May 2 at $2,281. 

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Pound Sterling.

USD   0.06% 0.05% 0.12% 0.14% 0.13% 0.15% 0.06%
EUR -0.07%   0.00% 0.05% 0.06% 0.08% 0.09% 0.01%
GBP -0.05% 0.02%   0.08% 0.09% 0.10% 0.11% 0.02%
CAD -0.12% -0.05% -0.08%   0.02% 0.02% 0.03% -0.05%
AUD -0.15% -0.06% -0.09% 0.00%   0.01% 0.00% -0.05%
JPY -0.13% -0.07% -0.10% -0.02% 0.00%   -0.01% -0.07%
NZD -0.13% -0.03% -0.07% -0.03% 0.00% 0.02%   -0.05%
CHF -0.09% -0.01% -0.03% 0.05% 0.06% 0.07% 0.08%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

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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