Gold Prices Rebound from Key Support Level, Market Focuses on US PPI for Federal Reserve Indicators

Gold Prices Rebound from Key Support Level, Market Focuses on US PPI for Federal Reserve Indicators

Gold prices climbed back above the $2,000 mark on Thursday, buoyed by a weaker U.S. dollar and declining U.S. Treasury yields following lackluster American economic data. The disappointing January U.S. retail sales, which contracted by 0.8% instead of the expected 0.1% decline, signaled a potential softening in household consumption.

While subdued consumer spending might typically prompt the Federal Reserve to consider policy easing, the current context, characterized by persistent inflation, may deter preemptive action. The Fed remains committed to restoring price stability, with upcoming attention on Friday's release of the producer price index (PPI) survey.

Analysts anticipate a moderation in January's headline PPI to 0.6% year-on-year from the previous 1.0%, with the core gauge expected to ease to 1.6% from December's 1.8%. While subdued PPI figures could bolster gold prices, an upside surprise akin to the recent CPI report, indicating stagnation in disinflation efforts, may lead to a rise in yields and the U.S. dollar, thus weighing on precious metals.

Technical Analysis:

Gold rallied after bouncing off confluence support at $1,990, aiming for resistance at $2,005. A successful breach could signal further gains towards the 50-day simple moving average at $2,030 and potentially $2,065. Conversely, a bearish reversal could bring support levels at $1,990 and $1,975 into focus, with further downside targeting the 200-day simple moving average near $1,965.