- Gold bounces from a weekly minimum of $ 3,120 as the US yields fall and the DXY weakens, increasing the attractiveness of safe refuge.
- The US PPI of the US and retail sales do not meet expectations, which leads markets to completely discount two Fed cuts by 2025.
- The tensions between Ukraine and Russia resurface while Putin refuses to dialogue, adding a geopolitical premium to the ingot.
The price of gold was abruptly recovered on Thursday after reaching a weekly minimum of $ 3,120, registering solid profits of more than 1.40%, driven by the general weakness of the US dollar due to a favorable report of the production price index (PPI) in the United States (USA). This, together with the fall in the yields of the American bonds, keeps the Xau/USD quoting $ 3,228 at the time of writing.
The yellow metal began to rise in advance of the US PPI data, which in April were surprisingly below the estimates and data of March. At the same time, retail sales for the same period slowed as homes advanced vehicle purchases, and employment data revealed by the US Department of Labor showed that the number of Americans who requested unemployment benefits was in line with estimates.
The data caused a reaction in the fixed income markets, taking markets to completely deduct two cuts of interest rates by the Federal Reserve (Fed) in 2025, being the first expected in September.
Another reason behind the advance of gold could be the reluctance of Russian President Vladimir Putin to meet with Ukrainian President Volodymyr Zelenskyy in Türkiye to discuss a resolution of his conflict.
Given the fundamental background, gold is prepared to extend its profits. However, the de -escalation of the commercial war between the US and China was an obstacle to the yellow metal, which experienced a loss of more than $ 120 as the prices of the XAU/USD slipped to $ 3,200.
On this week’s agenda, the US economic calendar will include housing data, and operators will be attentive to the preliminary consumer’s feeling survey at Michigan University for May.
What moves the market today: US weak data and collapse of US yields drive
- The US PPIs in April unexpectedly fell an intermencing -5%, failing an estimate of an increase of 0.2%. The underlying PPI fell by -0.4%, below the forecasts of an expansion of 0.3%.
- April’s retail sales in the US increased an intermensual 0.1% after the March figures were checked to 1.7%. Economists expected the numbers to remain unchanged compared to the previous month.
- Initial unemployment applications in the US for the week that ended on May 10 increased by 229,000, as expected, without changes compared to the previous week.
- The yields of the US Treasury bonds are falling, with the 10 -year US treasure bonus yield lowering nine basic points to 4.49%. Meanwhile, the US real yields followed the same trend, lowering nine and a half points to 2,077%.
XAU/USD technical perspective: double roof at risk of being canceled
From a technical point of view, the gold rebound could be ephemeral if buyers fail to close above $ 3,200 in the newspaper. In that case, they need to exceed the peak of May 14, $ 3,257 to maintain the hope of testing $ 3,300 and cutting the weekly losses. However, the impulse favors a greater decrease, as indicated by the relative force index (RSI). Operators must be cautious, since the current climb could be a correction of an ongoing bearish trend.
On the other hand, if the Xau/USD closes daily below $ 3,200, a greater decrease is expected, with the simple mobile (SMA) of 50 days at $ 3,155 serving as the next level of support, followed by $ 3,100.
FAQS GOLD
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
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.
