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Gold Prices Soar on Upbeat US Data, Powell’s Mixed Signals

Gold prices surged above $2,350 on Tuesday after stronger-than-expected US producer price data (PPI) reignited inflation concerns. This bullish momentum came despite a decline in US Treasury yields, typically a headwind for the yellow metal.

Hot PPI Fuels Gold Rally:

  • The US Bureau of Labor Statistics (BLS) reported that producer prices rose more than anticipated, with only one reading matching forecasts.
  • This data suggests persistent inflationary pressures, potentially prompting investors to seek safe-haven assets like gold.

Powell’s Hawkish Shift Lifts Gold:

  • Federal Reserve Chair Jerome Powell’s comments following the PPI release added further support to gold prices.
  • While Powell maintained his view that inflation will eventually subside, he expressed less confidence in the disinflationary outlook compared to previous statements.
  • He also projected US GDP growth of 2% or higher, buoyed by the strong labor market.

Technical Analysis: Gold Eyes $2,400 Breakout

  • Gold’s uptrend resumed after a brief dip on Monday. However, it remains below the recent peak of $2,378, potentially limiting further gains in the near term.
  • The Relative Strength Index (RSI) indicates bullish momentum, suggesting potential for a breakout.
  • Key resistance levels include the May 10th high of $2,378, the psychological $2,400 mark, and the April 19th high of $2,417.

Downside Risks:

  • A decline below $2,359 could trigger a pullback towards the May 9th low of $2,306 and potentially the $2,300 level.
  • A sustained break below $2,300 could expose the 50-day Simple Moving Average (SMA) at $2,249.