Gold (XAU/USD) slipped on Thursday as the US Dollar steadied ahead of the US PPI release at 12:30 GMT. The metal was trading near $4,383 after touching an intraday high of $4,434, while the US Dollar Index (DXY) hovered around 98.90 following a low of 98.71. Markets are focused on whether producer inflation re-accelerates in August, with headline PPI forecast at 0.4% month-on-month after 0.0% in July and 5.3% year-on-year versus 4.7%; core PPI is seen at 0.3% MoM from 0.2% and 4.6% YoY from 4.2%. Rising oil prices have added to inflation concerns, and the CME FedWatch Tool shows a 62% implied chance of a Federal Reserve rate rise at the 15–16 September meeting, although a Reuters poll of economists points to no further hikes through year-end.
Higher US yields have also weighed, with the 10-year Treasury around 4.85%, near the highest since November 2023, after a larger bond buyback plan failed to lift sentiment. Technically, XAU/USD remains above the 50-day and 100-day SMAs but below the 200-day SMA near $4,538; RSI is around 49 and MACD is below zero. Resistance is seen at $4,538, then $4,700, while support levels are cited near the latest close, $4,340, $4,266 and $4,000. Central banks typically target inflation around 2%, and higher inflation often supports a currency via higher rates, while higher rates tend to raise the opportunity cost of holding non-yielding gold.
Short-Biased Trading Approach for Gold (XAU/USD)
we recommend that derivative traders adopt a defensive, short-biased approach toward gold (XAU/USD) in the coming weeks. With the US Dollar Index steadying near 98.90 and the 10-year US Treasury yield hovering close to a multi-year high of 4.85%, non-yielding assets like gold are facing significant headwinds. Historically, when real yields rise and the dollar strengthens, gold tends to experience sustained downward pressure as the opportunity cost of holding the metal increases.
Risk Management and Technical Levels
To manage risk effectively, we should closely monitor the upcoming US Producer Price Index (PPI) and Consumer Price Index (CPI) releases. Economists anticipate headline annual PPI to heat up to 5.3%, driven in part by recent surges in global crude oil prices which have climbed over 5% in the past month. A higher-than-expected inflation print will likely solidify expectations for a Federal Reserve rate hike at the September 15-16 meeting, where markets are currently pricing in a 62% probability of an increase.
From a technical perspective, we suggest establishing short positions on temporary rallies, targeting the immediate support zone near the 100-day Simple Moving Average at $4,340. The daily Relative Strength Index is hovering in neutral territory at 49, while the MACD remains negative, indicating that upward bounces are likely to face strong selling pressure. Traders should place tight stop-loss orders just above the 200-day Simple Moving Average at $4,538 to protect against any unexpected safe-haven buying.
