Gold (XAU/USD) retreated on Friday, reversing some of its previous gains after hotter-than-expected US Producer Price Index (PPI) data for June tempered expectations for aggressive Federal Reserve (Fed) rate cuts. The precious metal, which had rallied following softer consumer inflation data on Thursday, traded lower in the $2,390s as the weekend approached.
Inflation Data and Fed Policy Outlook
The higher-than-forecast PPI, seen as a leading indicator of broader inflation, partially offset the optimism generated by the cooler Consumer Price Index (CPI) report. While the CPI data had fueled hopes for earlier-than-anticipated rate cuts, the PPI figures raised concerns about persistent inflationary pressures.
Fed Chair Jerome Powell, in his recent Congressional testimony, acknowledged the progress made in curbing inflation but stressed the need for further evidence before pivoting to a rate-cutting cycle. This cautious stance, coupled with the mixed inflation data, has created uncertainty regarding the Fed’s future policy moves.
Gold Technical Analysis: Sideways Consolidation Continues
Gold’s price action suggests a continuation of the sideways consolidation that has been unfolding since April. The precious metal remains within a range bound by a floor at $2,280 and a ceiling at $2,450, the May 20th all-time high.
Despite the recent pullback, the long-term outlook for gold remains bullish, with a potential breakout to the upside still on the table. A decisive break above the $2,450 resistance could trigger further gains, potentially targeting $2,555.
Key Takeaways:
- Gold retraces gains as hotter US PPI data dampens rate cut optimism.
- Fed’s cautious stance and mixed inflation data create uncertainty.
- Gold remains in sideways consolidation within a broader uptrend.
- Potential breakout above $2,450 could lead to further upside momentum.
