Gold (XAU) fell by 0.18% on Friday following higher-than-expected U.S. Producer Price Index (PPI) figures.
👉 Possible effects for traders
XAUUSD remained steady near a seven-week high on Friday as the U.S. dollar (USD) and Treasury yields weakened despite a report showing that U.S. producer prices rose more than expected last month. The data didn’t bolster the greenback, which had declined on Thursday following the Consumer Price Index (CPI) data, demonstrating a decreasing inflation rate. Treasury yields also continued to decline, giving gold a bullish impulse. The U.S. two-year note reached 4.4%, down by 4.6 basis points towards the lowest since 8 March, while the yield on the 10-year note decreased by 2.4 basis points towards 4.1%.
The gold price rose for the third consecutive week as cooling U.S. inflation strengthened expectations for interest rate cuts by the Federal Reserve (Fed). Last week’s data revealed that U.S. consumer prices dropped in June for the first time in four years, solidifying projections of a U.S. rate reduction in September. However, the data also indicated softer physical gold demand in Asia due to elevated prices, which raised market caution.
Shock over the assassination attempt on former U.S. President Donald Trump affected financial markets this Monday. Traders have initially reacted by buying the U.S. dollar and selling long-term U.S. Treasuries, dubbed the ‘Trump-victory trades’, as the incident appears to boost his chances of winning the presidential elections. Treasury yields tend to rise when the possibility of a Trump victory increases, partly due to the expectation that his economic policy will increase inflation and debt. Fed Chair Jerome Powell will give a speech today at 4:30 p.m. UTC, which may affect expectations for a rate cut in September. ‘Spot gold may retest resistance at $2,461 per ounce, a break above which could open the way towards $2,426–$2,438 range’, said Reuters analyst Wang Tao.
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