- Gold futures failed to sustain their early gains and nearly stabilized as the dollar recovered from lower levels.
- The bullish rebound gains for the XAU/USD gold price reached the $1786 resistance level for an ounce, its highest in three months, and the gold price is stabilizing around the $1,765 level, waiting for any new developments.
- In contrast, the US dollar index fell to 105.34 after data from the Labor Department showed that producer prices in the United States crawled much less than expected in October, and rose to 106.70, a slight gain from its previous close.
Data from the Labor Department showed producer prices in the US rose much less than expected in October. The data reported that the producer price index for final demand rose 0.2% in October, matching the revised increase in September. Economists had expected producer prices to rise 0.5% compared to the 0.4% increase originally reported for the previous month. The report also showed the annual rate of producer price growth slowing to 8% in October from 8.4% in September. The annual growth rate was expected to decline to 8.3%. After last week's consumer price inflation report, the data added to optimism that the Federal Reserve will slow the pace of US interest rate hikes as soon as next month.
On another note. US stock indices jumped after producer prices confirmed slowing inflation, strengthening the Federal Reserve's stance to cool the pace of interest rate increases. Performance-wise, the S&P 500 Index rose after struggling for direction in the early afternoon session as geopolitical fears from Europe fueled a move away from risky assets.
Markets have turned risky in recent days, trading a lower-than-expected US CPI reading that many believe will allow the Federal Reserve to raise US interest rates in half-point increments. While a slew of Fed speakers have indicated in recent days that officials may slow the pace of rate hikes, they also emphasized that the US central bank has more work to do to tame inflation. Some investors are still not convinced that the latest data will do much to get the Fed moving.
XAU/USD (Gold) Forecast
So far, the general trend of the XAU/USD (gold) price is still bullish. As I mentioned before, the stability of the bulls is above the $1785 resistance, so the opportunity to move toward the psychological resistance is $1800 an ounce. So far, the rebound gains pushed the technical indicators towards overbought levels, and therefore I expect to activate profit-taking selling operations at any time. Especially if the US dollar returns to compensate for its recent losses.
On the other hand, the price of gold XAU/USD moved according to the performance on the daily chart towards the support level of 1730 dollars for an ounce, which will end the current bullish aspirations. The price of gold will depend on the performance of the US dollar and the extent to which investors are willing to risk or not, as well as the reaction from US data and statements of US Federal Reserve officials.
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