Market Analysis

Before the US PPI, the price of gold maintains its intraday gains as the USD's moderate strength limits its upside

Amos Simanungkalit · 11 Oct144.1K Views

Gold price (XAU/USD) pulls back slightly from a three-day high, hovering around the $2,640 level during the early European session on Friday. Despite the retreat, the yellow metal remains up over 0.40% for the day. A rise in US weekly jobless claims has highlighted potential weakness in the labor market, which could prompt the Federal Reserve (Fed) to continue cutting interest rates. This has led to a modest decline in US Treasury bond yields, while a softer risk tone supports the non-yielding gold, allowing it to maintain positive momentum for the second consecutive day.

However, stronger-than-expected US consumer inflation data released on Thursday has caused investors to rule out the likelihood of another large Fed rate cut in November. This has helped the US Dollar (USD) halt its corrective pullback from Thursday's drop, which has, in turn, put some pressure on gold prices. Traders are now focusing on upcoming US economic data, including the Producer Price Index (PPI), the Preliminary Michigan Consumer Sentiment Index, and Inflation Expectations, along with Fedspeak, for short-term direction.

Technical Outlook: Gold poised for further gains towards the $2,670-$2,672 resistance zone

From a technical perspective, the recent rebound from near the $2,600 mark and the subsequent climb back above the $2,630 resistance-turned-support level favors a bullish outlook. Additionally, daily chart oscillators remain in positive territory, suggesting that the path of least resistance for gold is upwards. This opens the door for a potential rise towards the $2,657-$2,658 horizontal resistance, and further towards the key $2,670-$2,672 supply zone. The bullish momentum could eventually propel XAU/USD to an all-time high around the $2,685-$2,686 region, reached in September, with the next major target being the $2,700 mark. A break above this level could signal an extension of the ongoing multi-month uptrend.

On the downside, the session low near $2,630-$2,628 serves as immediate support. A sustained break below this level could expose the $2,600 critical support zone. If breached, this would be seen as a signal for bearish traders, potentially triggering a deeper correction towards the $2,560 support zone, followed by the $2,535-$2,530 region, and ultimately the psychological $2,500 level.