Gold Price Forecast XAU/USD – Limited Response to Hot PPI Data Ahead of Next Week’s CPI Report, Fed Rate Hike

Gold futures are up but well off their high after the release of a stronger-than-expected producer price inflation (PPI) report. Some traders were spooked after the data increased the odds of higher Fed rate hikes for a longer-period of time. But others are shrugging off the news as well as a rise in U.S. Treasury yields.

At 14:12 GMT, February Comex gold futures are trading $1807.40, up $5.90 or +0.33%. The SPDR Gold Shares ETF (GLD) is at $167.07, up $0.60 or +0.36%.

The PPI data indicated that wholesale inflation was higher than expected. The PPI for final demand grew by 0.3% in November, seasonally adjusted, similar to the trend seen in September and October. Consensus estimates had been pegged to rise by 0.2% in the month of November.

On an unadjusted basis, the PPI index increased by 7.4% for the 12 months ending in November, higher than expectations of 7.2%.

The PPI index excluding food, energy, and trade services grew by 0.3% in November versus 0.2% in October.

Traders Looking Ahead to Next Week’s CPI Report, Fed Economic Projections

The release of U.S. consumer inflation data next Tuesday and the Fed’s economic projections next Wednesday were likely the reasons for the gold market’s limited reaction to the hot PPI data.

Although Fed Chair Jerome Powell has indicated a softer pace of interest rate hikes, perhaps starting in December, the job market and consumer spending trends are still too strong. This is a concern for investors that could prompt the Fed to consider continuing its aggressive policy.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1822.90 will signal a resumption of the uptrend. A move through $1752.90 will change the main trend to down.

The minor trend is also up. A trade through $1778.10 will shift momentum to the downside.

The nearest support is a long-term Fibonacci level at $1804.30. This is followed by a pair of 50% levels at $1778.20 and $1771.50.

The closest resistance is the Aug. 10 main top at $1836.70, followed by a long-term 50% level at $1861.30.

Daily Swing Chart Technical Forecast

Trader reaction to the Fibonacci level at $1804.30 is likely to determine the direction of the December Comex gold market into the close on Friday.

Bullish Scenario

A sustained move over $1804.30 will indicate the presence of buyers. The nearest upside targets are the intraday high at $1819.00 and last week’s closing price reversal top at $1822.90. The latter is a potential trigger point for an acceleration into the Aug. 10 main top at $1836.70.

Bearish Scenario

A sustained move under $1804.30 will signal the presence of sellers. This will likely be investors taking profits and playing for a pullback into a support area like $1778.20 to $1771.50. The latter is the last potential support before the main bottom at $1752.90. A trade through this level will change the main trend to down.