Market Data 
- XAU/USD remains subdued under the weight of a strengthening Dollar and recent US inflation data.
- Producer Price Index exceeds expectations, suggesting Fed easing cycle might be reconsidered.
- Investors recalibrate expectations for December Fed rate cut amid ongoing inflation concerns.
Gold recovers some ground on Thursday yet remains trading below its opening price for the fifth consecutive day, undermined by the Greenback’s advance for its own fifth consecutive day. A slightly hot inflation report in the US and solid jobs data sponsored XAU/USD’s leg down toward the 100-day Simple Moving Average (SMA). At the time of writing, Bullion trades at $2,568.
The market mood shifted negatively yet failed to boost Gold’s prices and underpin the US Dollar. The US Bureau of Labor Statistics revealed that the Producer Price Index (PPI) rose in October, exceeding estimates and September’s figures.
This indicates that the Federal Reserve’s (Fed) job is far from done, even though the central bank embarked on an easing cycle that has seen the Fed lower its primary interest rate instrument by 75 basis points since September 2024.
At the same time, the US Department of Labor revealed that unemployment claims filled by Americans diminished compared to the previous reading
Fed officials have recently underscored the delicate act of balancing inflation control with employment goals. Governor Adriana Kugler stressed the importance of addressing both mandates, pointing out that while strides have been made toward reducing inflation, hitting the 2% target remains challenging.
Likewise, Richmond Fed President Thomas Barkin acknowledged the progress in curbing inflation but warned against premature optimism. He sees risks like substantial union wage settlements and potential tariff hikes, which could spark inflationary pressure.
Gold has been undermined by investor fears that US President-elect Donald Trump’s proposed tariffs and tax reductions are likely to increase inflation, which could prompt the Fed to pause its easing cycle.
Market participants see a 72% chance of a quarter percentage rate cut by the Fed in the upcoming December meeting, down from 82% a day ago.
Investors are awaiting remarks from Fed Chair Jerome Powell later on Thursday along with Friday’s US Retail Sales data.
Daily digest market movers: Gold steadies alongside strong US Dollar
- Gold prices recover as US real yields, which inversely correlate against Bullion, fall three basis points to 2.068%. The DXY registers gains of 0.18% to 106.67.
- Fed Chair Jerome Powell, commented the US economy is not sending signals that US central bank needs to be in a hurry to lower interest rates, and he expect inflation to “come down toward the 2% goal.” Powell reassured the Fed’s commitment on inflation.
- The US PPI surpassed expectations with the headline increasing by 2.4% YoY, beating the 2.3% forecast and up from 1.9% in September. The Core PPI, often influencing the core Personal Consumption Expenditures (PCE) Price Index, rose by 3.1% YoY, higher than the prior 2.9% and above the expected 3%.
- Initial Jobless Claims for the week ending November 9 came in at 217K, a decrease from the previous week’s 221K and below the forecast of 223K.
- According to the December fed funds futures contract data from the Chicago Board of Trade, investors are projecting a 25 bps Fed rate cut in December.
XAU/USD Technical Outlook: Gold price holds firm, but downside risks remain
Gold (XAU/USD) has recently declined below the October 10 swing low of $2,603, exacerbating further losses below $2,600 and opening the door to a new two-month low of $2,536, briefly below the 100-day Simple Moving Average (SMA) at $2,547. Nevertheless, sellers’ failure to push Bullion prices toward $2,500 paved the way for a leg-up.
XAU/USD’s first resistance is seen at $2,600. If buyers reclaim that level, they could test the 50-day SMA at $2,650, with subsequent resistance around $2,700. Surpassing this could open the path to the November 7 high of $2,710.
The Relative Strength Index (RSI) has moved away from its neutral line, suggesting a bearish momentum that could lead to further declines in XAU/USD.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
