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Gold surges as April's unexpected PPI decline sparks speculation of Fed rate cuts.
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Retail Sales growth slows to 0.1%, reflecting tariff impacts and signaling potential economic weakness.
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Market expectations for a 2025 Fed rate cut rise to 53 bps, while the DXY slips 0.15% to 100.88, bolstering Gold's recovery.
Gold prices regained some ground during Thursday’s North American session, recovering from a five-week low as weak US economic data fueled hopes of a Federal Reserve rate cut. At the time of writing, XAU/USD is trading at $3,202, marking a 0.82% increase.
Economic Data Fuels Gold Recovery
- The recovery in gold prices came after the release of softer-than-expected US economic indicators. The Producer Price Index (PPI) for April fell unexpectedly by 0.5% month-over-month, contrary to forecasts of a 0.2% increase. Meanwhile, the core PPI dropped by 0.4%, also missing the anticipated 0.3% rise.
- Simultaneously, US Retail Sales for April edged up just 0.1% month-over-month, significantly lower than the 1.7% revised increase in March. Economists had expected retail sales to remain unchanged from the previous month, but the marginal rise reflects weakened consumer spending due to ongoing tariffs.
- In addition, Initial Jobless Claims for the week ending May 10 remained unchanged at 229,000, aligning with expectations.
- The data pushed XAU/USD up as the Greenback, measured by the US Dollar Index (DXY), fell 0.15% to 100.88. Market participants are now increasing their bets on a Federal Reserve rate cut of 53 basis points in 2025, up from 48.5 bps anticipated earlier.
- The recent de-escalation of the US-China trade war initially weakened gold prices due to improved risk sentiment, with the precious metal falling from approximately $3,326 to $3,207, losing over $120. However, the latest economic data reflecting a slowing economy has revived gold’s appeal as a safe-haven asset.
Technical Analysis: Gold’s Recovery May Be Short-Lived
From a technical perspective, gold's current rebound could be temporary if the daily close fails to stay above $3,200. To maintain bullish momentum, buyers must push past the May 14 peak of $3,257 to target $3,300, minimizing weekly losses.
However, the Relative Strength Index (RSI) indicates continued downside risk, suggesting the current uptick could merely be a corrective move in a broader downtrend. A daily close below $3,200 could prompt further declines, with the 50-day Simple Moving Average (SMA) at $3,155 providing the next support level, followed by $3,100.
Investors will closely monitor upcoming US economic releases, including speeches from Federal Reserve officials and the University of Michigan Consumer Sentiment Index, for further clues on the economic outlook and monetary policy.
