Earlier today, gold prices showed signs of recovery during the North American trading session, following the release of US economic data. The data indicated a slowdown in factory inflation, while consumer spending was affected by the recent implementation of US tariffs. At the time of writing, the XAU/USD pair was trading at $3,202, up 0.82% from its previous close.
After hitting a five-week low of $3,120, the non-yielding precious metal rebounded as demand increased, pushing it back above the $3,200 level. US data released today showed that the Producer Price Index (PPI) for April unexpectedly fell by 0.5% on a monthly basis, contrary to expectations of a 0.2% increase. The core PPI also fell by 0.4%, below the forecasted growth of 0.3%.
In addition, US Retail Sales for April showed a slower growth rate of 0.1% on a monthly basis, after the previous month’s figures were revised to 1.7%. Economists had predicted no change from the previous month’s numbers.
Meanwhile, Initial Jobless Claims for the week ending May 10 were in line with expectations, remaining unchanged from the previous week at 229,000.
The positive data prompted a rise in the XAU/USD pair, with bulls managing to push the price back above the $3,200 level. The US Dollar Index (DXY) also fell by 0.15% to 100.88, contributing to the rise in gold prices.
Market sentiment towards the Federal Reserve (Fed) is also shifting, with investors now expecting a 53 basis point policy easing in 2025, up from the 48.5 points expected on Wednesday.
The recent reduction in tensions in the US-China trade war has also impacted the price of gold, as investors’ risk appetite has improved. The rise in risk appetite resulted in gold prices falling from $3,326 to $3,207, a drop of over $120. However, with the latest data reflecting a weak US economy, gold has since recovered.
Looking ahead, the week’s economic calendar for the US includes further speeches from Fed officials and the University of Michigan (UoM) Consumer Sentiment index.
From a technical perspective, the rebound in gold prices may be short-lived if buyers fail to push the price above the $3,200 level. To remain optimistic, they would need to surpass the May 14 high of $3,257, with further resistance levels at $3,300 and $3,400. However, the Relative Strength Index (RSI) indicates a bearish momentum, suggesting further downside in the market. If the XAU/USD pair were to close below $3,200 on a daily basis, it could lead to further declines. In this case, the next support levels at $3,155 (50-day SMA) and $3,100 could be tested.