- Gold's rally fueled by increased geopolitical risks in the Red Sea region and a shift towards risk-averse trading.
- US Producer Price Index data falls short of expectations, bolstering speculation of imminent Fed policy easing.
- Decline in US Treasury yields and a mixed Dollar performance further support Gold's upward momentum.
Gold price rallied sharply on Friday, spurred by a risk-off impulse due to tensions arising around the Red Sea, as the US and the UK retaliated against Houthi's attack on a US ship on Thursday. Therefore, XAU/USD’s refreshed five-day highs at around $2062, and trades at $2045, up 0.70%.
XAU/USD hits five-day high at $2062, sponsored by mixed US data, increased odds for Fed rate cuts
Traders bought Gold due to the escalation of the conflict in the Middle East. Besides that, the yellow metal was boosted by the drop in US Treasury bond yields, as bets that the US Federal Reserve would cut rates aggressively beginning as soon as March increased.
In the meantime, the latest inflation report in the United States (US), revealed that prices paid by producers, also known as the PPI, slid below estimates, with the PPI monthly dropping -0.1%, below forecasts of 0.1%. In a year-over-year number, the PPI rose by 1%, below forecasts of 1.9%. Core PPI was unchanged at 0% compared with November’s data but below estimates, while year-over-year figures dipped below projections and the previous reading, from 2% to 1.8%.
Although today’s data is supportive of a dovish approach by the Fed, on Thursday consumer inflation data was higher than expected. It should be said that some Fed officials made comments on December’s data, and pushed back against expectations for a rate cut in March.
The yellow metal was also supported by the drop in US yields, particularly the short-end of the curve, with the 2-year Treasury note plunging almost ten basis points to 4.16%, reducing the US 2s-10s yield curve inversion. That weighed on the Greenback, which according to the US Dollar Index (DXY) clings to decent gains of 0.15%, up at 102.47.
XAU/USD Price Analysis: Technical outlook
Gold’s daily chart remains upward-biased after bouncing off the weekly lows of $2013, which exacerbated XAU’s rally toward the $2060 area, before sliding toward the 20-day moving average (DMA) at $2046. If buyers crack that level and the $2050 figure, that could open the door to retesting weekly highs. Further upside is seen at $2100. On the flip side, XAU/USD’s buyers' failure to reclaim $2050 could open the door for further losses. First support is seen at today’s low of $2028, followed by the week’s low of $2013.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD rebounds on Thursday after midweek pullback
EUR/USD tuned back into the high end on Thursday, getting bolstered by a broad-market selloff in the Greenback. US data that printed better than expected helped to ease concerns of a possible economic slowdown within the US economy looming over the horizon.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Ethena Labs launches new UStb stablecoin backed by BlackRock's BUIDL token
Ethena Labs announced on Thursday that it has released a new stablecoin product, UStb. The new stablecoin will be fully collateralized by BlackRock's USD Institutional Digital Liquidity Fund and function similarly to a traditional stablecoin.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.