Gold prices maintain a positive bias ahead of the US PPI but struggle to gain strong bullish momentum

Gold prices (XAU/USD) hold onto modest intraday gains during the first half of the European session on Thursday, though they lack strong follow-through and remain below the record high reached earlier this week. Investor concerns over US President Donald Trump's trade tariffs potentially sparking a global trade war continue to support demand for the safe-haven metal. Additionally, a decline in US Treasury bond yields has weakened the US Dollar (USD), hitting a weekly low and further benefiting gold.

Expectations that Trump's protectionist policies will drive inflation higher in the US add to gold’s appeal as a hedge against rising prices. However, the stronger-than-expected US Consumer Price Index (CPI) data released on Wednesday has reinforced market expectations that the Federal Reserve (Fed) will maintain its hawkish stance and keep interest rates steady for an extended period. This, in turn, limits gold’s upside as traders shift focus to the upcoming US Producer Price Index (PPI) release later today.

Gold Bulls Remain Cautious Amid Diminished Fed Rate Cut Expectations

• The initial market reaction to the latest US inflation data was short-lived, as concerns over Trump’s trade tariffs continue to bolster safe-haven demand for gold.
• On Monday, Trump signed executive orders imposing 25% tariffs on steel and aluminum imports into the US, while also promising broader reciprocal tariffs to match levies imposed by other governments on US products.
• The US Bureau of Labor Statistics reported that headline CPI rose 0.5% in January—the sharpest increase since August 2023—pushing the annual rate to 3% from December’s 2.9%.
• Core CPI, which excludes food and energy prices, increased 0.4% month-over-month and jumped to 3.3% year-over-year, exceeding the 3.1% market forecast, signaling persistent inflationary pressures.
• Fed Chair Jerome Powell reiterated to US lawmakers that the fight against inflation is not over, suggesting that interest rate cuts will remain on hold until inflation shows a clear path back to the 2% target.
• The Atlanta Fed President noted that the labor market remains strong and GDP is more resilient than expected, though the latest inflation data warrants continued monitoring.
• Market participants have adjusted their expectations, now pricing in just one Fed rate cut by the end of the year. This drove the yield on the benchmark 10-year US Treasury bond to its biggest one-day rise since December.
• Despite this, the US Dollar remains weak, hovering near the lower end of its weekly range, offering additional support to the USD-denominated gold price.
• Traders now turn their attention to Thursday’s US economic data, including the Producer Price Index (PPI) and Weekly Initial Jobless Claims, which could influence the USD and impact gold’s price movement.

Gold Price Dips Could Offer Buying Opportunities Amid a Constructive Outlook

From a technical standpoint, the daily Relative Strength Index (RSI) remains in overbought territory, warranting caution before expecting further gains. Bulls may pause near the $2,942–2,943 zone, marking the all-time high reached on Tuesday, which now serves as a key resistance level.

On the downside, a break below the $2,900 psychological level could expose the overnight swing low near $2,864. Further selling pressure may accelerate the corrective decline toward intermediate support around $2,834–2,832, with the $2,800 level acting as a key support zone.