- Gold hits $2015, benefiting from a weaker dollar and higher US Treasury yields amid persistent signs of inflation.
- The US PPI and core PPI exceed forecasts, indicating that inflation continues and complicates the Fed's objectives.
- Signs of future rate cuts by Fed officials weigh on the market outlook, increasing gold's appeal as a hedge against monetary policy ambiguity.
The price of Gold extended its gains for two consecutive days, hitting a three-day high at $2015 while the Dollar fell, even as US Treasury yields rose. US economic data suggests inflation is stronger than expected, although Federal Reserve officials opened the door to easing policy.
XAU/USD rises as US data highlights persistent inflation, Fed officials suggest patience
XAU/USD trades at $2,012.14, losing 0.39%. Data from the US Department of Labor revealed that prices paid by producers rose above estimates, indicating that the US Federal Reserve still has work to do to curb inflation. The Producer Price Index (PPI) for January was 0.9%, above estimates but below 1% in December. Core PPI soared 2%, beating consensus and data from the previous month.
At the same time, US housing data recorded a -14.8% drop, from 1,562 million to 1,331 million, while construction permits fell -1.5%.
On the other hand, the first Consumer Sentiment Survey from the University of Michigan (UM) noted that Americans remain optimistic about the economic situation. The index improved from 79.0 to 79.6, while one-year inflation expectations rose to 3%, while five-year inflation expectations remained unchanged at 2.9%.
US Treasury yields, specifically the 10-year yields, rose six basis points to 4.29%, failing to support the Dollar.
Meanwhile, Federal Reserve officials gave statements, with Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly leading the way. Bostic said patience is needed and he foresees two rate cuts, which could begin in the summer if the data warrants it. Daly said there is work to be done, adding: “We will have to resist the temptation to act quickly when patience is needed and be prepared to respond with agility as the economy evolves.”
Both recognized that inflation has a downward trend, but remain cautious about the calendar to begin to relax monetary policy.
Given the fundamental background, the price of Gold would continue to drift from the outlook for the US economy. If inflation picks up, there could be a rise in US Treasury yields. Therefore, further declines in XAU/USD are expected. On the contrary, if inflation continues to converge towards the Fed's 2% target, the door could open to rate cuts, which would undermine the appeal of the dollar. This means that XAU/USD is expected to rise.
XAU/USD Price Analysis: Technical Outlook
The price of Gold will end the week with losses, although it has recovered some ground. According to the daily moving averages (DMAs), If Breaking this last level would expose the 200-DMA at $1965.46. To the upside, the first resistance emerges at the 50-DMA at $2,031.98.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
