gold prices experienced a rebound early Friday after a recent drop from their five-week peak of $2,726 recorded on Thursday. This shift follows the release of stronger-than-expected data on the U.S. Producer Price Index (PPI), which intensified expectations for a hawkish stance from the Federal Reserve in December. As a result, the U.S. Dollar and Treasury bond yields gained momentum, exerting downward pressure on gold .
The precious metal appears poised to continue its upward trajectory, attempting to reclaim the $2,700 level or higher, buoyed by favorable conditions reflected in the daily relative strength index (RSI) and the resilience of the 50-day Simple Moving Average (SMA). The market’s shift comes as traders reassess their positions ahead of the Federal Reserve’s upcoming policy meeting, where a rate cut of 25 basis points is anticipated.
In November, the annual PPI surged by 3.0%, exceeding forecasts of 2.6%. Core PPI also rose by 3.4%, surpassing the expected 3.2%. The monthly increases of 0.4% for PPI and 0.2% for core PPI further reinforced the belief that the Federal Reserve would adopt a more aggressive monetary policy stance, especially following the robust economic indicators.
Support for the U.S. Dollar was also fueled by a sell-off of the EURO , triggered by a dovish response from the European Central Bank to economic challenges. Meanwhile, robust U.S. Treasury yields, supported by successful bond auctions, have further underpinned the strength of the dollar and constrained gold ’s price recovery.
As trading continues on Friday, gold is witnessing renewed interest amidst diminishing optimism for Chinese economic stimulus and heightened concerns regarding the ongoing U.S.-China trade tensions. Reports suggest that China has begun retaliatory measures in response to potential tariffs from the incoming U.S. presidential administration, impacting various sectors including technology and manufacturing.
Looking ahead, market participants will remain attentive to broader trends rather than any major economic data releases, particularly as they position themselves ahead of the Federal Reserve’s decision next week. For gold prices, maintaining support at the 50-day SMA of $2,671 will be critical to sustain positive momentum; otherwise, a drop could lead to a retest of the 21-day SMA at $2,650. The key support level to watch is the previous week’s low at $2,613.
