Gold Slides Below $4,350 on Hot US PPI Data
Gold prices dropped to $4,320 after US producer inflation data exceeded forecasts, raising expectations for a Federal Reserve rate hike.
Gold prices fell to approximately $4,320 during the early Asian session on Friday. The decline followed the release of US producer price data that showed inflation running hotter than expected. This development increased market bets on a Federal Reserve interest rate hike.
The Bureau of Labor Statistics reported that the US Producer Price Index rose 5.4% year-over-year in August. This figure exceeded the market consensus of 5.3%. Rising oil prices and geopolitical tensions further supported the case for tighter monetary policy.
Inflation Data Shifts Rate Expectations
Traders now price in a 70% probability of a rate increase next week. This is an increase from 62% prior to the data release. Higher interest rates typically reduce demand for non-yielding assets like gold. Investors often shift toward yield-bearing instruments when rates rise.
Core PPI matched expectations with a 4.6% annual increase. Headline PPI rose 0.4% on a monthly basis. Analysts noted that rising energy costs contributed to the underlying inflation pickup. These factors reinforce the pressure on the Federal Reserve to act.
Geopolitical Risks Impact Supply Chains
Iranian authorities stated they would escalate responses to further attacks. Reports indicate Iran attacked ten ships near the Strait of Hormuz. These events heighten concerns over global oil supplies. Supply disruptions can stoke inflation fears and support hawkish central bank policies.
TD Securities noted that the market shows elevated sensitivity to incoming data. An upside surprise in inflation would likely weigh on gold prices. Conversely, lower inflation figures could trigger new positioning in the market. The upcoming Consumer Price Index report will be the next major catalyst.
Technical Indicators Show Bearish Bias
Gold trades below the 100-day simple moving average. The price also sits under the Bollinger middle band. The Relative Strength Index is at 45, indicating fading upside momentum. Initial resistance is located near $4,340. Support is found around $4,252 according to technical analysis provided by Gold (Google News) sources.
