Gold (XAU/USD) Holds Above Key Support as Focus Shifts to US PPI and Fed Rate Cut Prospects

Gold prices are holding steady above $2,511 as the market awaits crucial US Producer Price Index (PPI) data and the likelihood of a Federal Reserve rate cut.

Trading at $2,518.48, gold has managed to stay in positive territory, despite recent strength in the US Dollar and rising Treasury yields. This stability comes in the wake of Wednesday’s CPI data, which showed inflation cooling down to 2.5%, down from 2.9%.

The lower-than-expected CPI figures have decreased the probability of a larger 50-basis-point rate cut, with the market now pricing in a more moderate 25 bps cut at the upcoming FOMC meeting. Traders seem to be treading cautiously, as gold faces headwinds from a stronger dollar but benefits from safe-haven demand amid economic uncertainty.

#Forex: Mixed US #inflation outcomes challenge dovish #Fed bias, allowing #USDollar to edge higher ahead of US #PPI & #ECB. #USDINR stays firmer near 84.00 resistance, firmer past 83.87 key support, whereas #Gold extends recovery from $2,470-72 support zone toward $2,530 hurdle. pic.twitter.com/uRpcsxxkwu

— Anil Panchal (@anilpanchal7) September 12, 2024

Traders Await US PPI and Unemployment Data

While gold has found support after the CPI report, attention is now turning to the US PPI data and Unemployment Claims, both set to be released today. The Core PPI is expected to show a 0.2% increase, while PPI m/m is forecast at 0.1%. Any surprises in these figures could provide further clarity on the Federal Reserve’s next move regarding interest rates.

Also, Unemployment Claims are forecast to remain steady at 227K, a key indicator of labor market health. A softer-than-expected PPI or weak employment data could further support gold, as investors would likely see this as reinforcing the case for a dovish Fed stance and lower interest rates moving forward.

Technical Outlook: Key Resistance and Support Levels to Watch

From a technical perspective, gold has maintained its position above key support at $2,511, bolstered by the 50-period EMA at $2,510. This level has been crucial in maintaining gold’s current uptrend. The next resistance is located at $2,526, and a breakout above this level could set the stage for a further move toward $2,538.

Investors will closely scan through U.S. #CPI data on Wednesday and #PPI reading Thursday. Spot #Gold remains supported above the psychological $2,500 level; any post-CPI forays below that big, round number should see bulls buying the dip once more, consistently since mid-August. pic.twitter.com/mfT6J3MuWP

— Cellar Politics® (@CellarPolitics) September 10, 2024

On the downside, if the $2,511 support fails to hold, gold could correct lower toward $2,500, with the next key support level at $2,484.

• Resistance Levels: $2,526, $2,538, $2,547
• Support Levels: $2,511, $2,500, $2,484

The RSI is currently sitting at 57.29, suggesting mild bullish momentum with room for more upside. However, failure to break above $2,526 could see gold pull back, especially if upcoming economic data supports a stronger US Dollar.

Conclusion

Gold’s ability to stay above $2,511 shows solid support, but its future direction depends largely on today’s PPI data and unemployment figures. A weaker-than-expected PPI would likely boost gold as it reinforces the case for a Federal Reserve rate cut.

However, stronger data could put pressure on the metal by supporting the US Dollar and raising Treasury yields. For now, traders should watch for a breakout above $2,526 to confirm further bullish momentum.