Gold Awaits US PPI and FOMC Minutes, Lacks Momentum

On Tuesday, the Gold price (XAU/USD) remained in a narrow trading range, consolidating its rebound from a seven-month low around $1,810. It maintained a position just above the $1,850 level, lacking significant directional momentum as traders awaited fresh signals regarding the Federal Reserve’s intentions regarding rate hikes. This cautious approach was influenced by the recent US Nonfarm Payrolls report, which indicated moderate wage growth, alleviating concerns about inflation and supporting a more dovish stance in Fed policy.

The ongoing Israel-Gaza conflict contributed to some safe-haven demand for gold, but this support was tempered by expectations of at least one rate hike in the near future, a generally positive risk sentiment in the market, and a slight uptick in the US Dollar, which limited further gains for the precious metal. 

As the week progressed, the release of the US Producer Price Index (PPI) and the FOMC minutes scheduled for Wednesday was anticipated to provide additional insights. These insights would be particularly relevant given the impending release of the US Consumer Price Index (CPI) report on Thursday.

Several factors shaped market sentiment:

– Reduced expectations of Federal Reserve rate hikes, combined with Middle East tensions, continued to lend support to gold.

– Atlanta Fed President Raphael Bostic’s assertion that no further rate hikes were necessary to reach the 2% inflation target underlined the dovish sentiment.

– Minneapolis Fed President Neel Kashkari’s suggestion that rising long-term Treasury yields could help combat inflation had an impact.

– The repricing of the Fed’s rate-hike expectations led to a decline in US bond yields, which, in turn, benefited XAU/USD.

– Concerns about the escalation of the Israel-Gaza conflict potentially pushing Crude Oil prices higher, thereby complicating the Federal Reserve’s efforts to combat inflation, remained in the backdrop.

– In response to these dynamics, the Fed might be compelled to maintain a hawkish stance, adding complexity to the prospect of achieving a soft landing.

– Investors were keeping a close watch on the upcoming US PPI and FOMC minutes releases, hoping for valuable clues regarding the Federal Reserve’s future stance on rate hikes, especially with the forthcoming consumer inflation data on Thursday.