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Shorting XAU after the Surge in the Gold Price Yesterday

The decline in the US dollar yesterday contributed to a surge in the price of Gold price, as Gold is often seen as a hedge against USD depreciation. The release of lower Consumer Price Index (CPI) and Producer Price Index (PPI) inflation data, indicating a slowdown in US inflation, could prompt market participants to adjust their expectations regarding the actions of the US Federal Reserve (Fed).

The US CPI and PPI inflation reports have stirred up even more pronounced reactions in the market this week, fostering an atmosphere of heightened volatility. With the CPI report indicating softer inflation, investors have been increasingly drawn to safe-haven assets amid the prevailing uncertainty.

Gold Chart H1 – The 20 SMA Has Turned Into ResistanceChart XAUUSD, H1, 2024.05.16 17:48 UTC, MetaQuotes Software Corp., MetaTrader 5, Demo

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This surge in demand for safe-haven assets has notably supported gold prices, driving the XAU/USD pair back towards the $2,400 mark. GOLD often serves as a refuge for investors during periods of economic instability or when inflationary pressures ease, making it an attractive option in the current environment.

US April industrial production

  • Overall Industrial Production: 0.0% growth, falling short of the expected 0.1% increase. The previous figure was initially reported at +0.4% but was revised down to +0.1%.
  • Manufacturing Output: Declined by 0.3%, contrary to the anticipated 0.1% growth. The previous month’s figure was revised from +0.2% to +0.1%, showing a weaker performance than previously reported.
  • Capacity Utilization: Remained steady at 78.4%, meeting expectations. However, the previous month’s utilization rate was revised slightly upward from 78.4% to 78.5%.

The slowdown in inflation might have implications for GDP, as it might suggest weaker consumer spending and economic activity. However, the broader economic impact is complex and can be influenced by various factors, such as ongoing challenges faced by companies like Boeing.

Boeing which a significant player in the aerospace industry, has encountered various issues in recent years, including the grounding of its 737 MAX aircraft and supply chain disruptions. These troubles can have ripple effects throughout the US industrial production and the broader economy, impacting not only Boeing itself but also its suppliers, related industries, and potentially the overall GDP.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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