Strong PPI data fails to pressure gold, focus shifts to growth outlook

Gold's price action after yesterday's stronger-than-anticipated US PPI release matched the pattern seen following the CPI data. The precious metal first dipped, then rebounded and surged to fresh record levels. US Treasury yields declined after the figures, a move that suggests either stretched market positioning or rising anxiety over the economic trajectory.

Although the forecasts for the Core PCE indicate a 0.34% month-on-month gain for October, market bets on an October rate hike dropped following the PPI data. The more notable development is a dovish adjustment further along the rate curve.

The geopolitical landscape has remained static. The Saudi-Houthi hostilities persist, with negotiations between the US and Iran stuck at an impasse. Crude oil values are still climbing against the backdrop of the unrest in the Middle East.

Key future catalysts include the Flash PMIs, the FOMC decision, the US-Iran talks, and the US midterm elections. An economic slowdown could start being factored into prices if the data begins to signal deteriorating conditions, a factor that would support gold.

Conversely, if economic momentum remains robust, gold could face renewed headwinds. A sustained dovish stance from the Fed, exceeding market forecasts, would cut real yields and provide a tailwind for the metal.

Gold technical assessment – daily timeframe

Gold on the daily timeframe is nearing the downward-sloping trendline. Sellers are expected to use the trendline as support, taking on risk above it to aim for a fall to the 3,885 mark. Buyers will be looking for a breakout higher to push a rally toward 4,700, with 4,500 as the first step.

Gold technical assessment – 4-hour timeframe

A significant resistance area exists near the 4,228 level on the 4-hour view. A probe above the trendline would make the 4,228 zone the sellers' final defence. From a risk management standpoint, sellers will likely enter near the trendline and the resistance, owning risk above it to set up for lower levels. Buyers will want to see a break above this resistance to unlock further highs, targeting 4,400.

Gold technical assessment – 1-hour timeframe

A minor ascending trendline on the 1-hour view is defining the current bullish momentum. Buyers are likely to keep leaning on this trendline, carrying risk just beneath it, as they push for new highs and a break through resistance. Sellers will be on the lookout for a move lower to increase short positions, aiming for the 3,885 level.