Spot gold rose 0.82% during early North American trading, reaching $3,202 after touching a five-week low of $3,120 earlier in the session. The recovery was driven by signs of cooling inflation and weakening consumer demand, as reflected in the latest U.S. economic indicators.
The Producer Price Index (PPI) for April fell 0.5% month-on-month, defying expectations for a 0.2% increase. Core PPI, which excludes food and energy, declined 0.4%, missing forecasts for a 0.3% gain. Retail sales data also disappointed, rising only 0.1% on the month, down from a revised 1.7% increase in March. Analysts had anticipated flat growth.
Meanwhile, the number of Americans filing for initial jobless claims held steady at 229,000 for the week ending May 10, in line with consensus expectations.
The soft economic data weighed on the U.S. dollar, with the Dollar Index (DXY) slipping 0.15% to 100.88. The pullback in the dollar supported gold prices, with investors increasing their bets on future rate cuts. Market pricing now suggests 53 basis points of Fed easing in 2025, up from 48.5 basis points anticipated a day earlier.
Risk Appetite Caps Gold Gains Despite Rebound
Despite the recovery, bullion’s upside was tempered by improved risk sentiment stemming from the easing of tensions in the U.S.-China trade relationship. The de-escalation contributed to a decline in gold prices earlier this week, sending XAU/USD down from around $3,326 to $3,207—a drop of more than $120.
Still, signs of economic sluggishness have provided a floor for gold. Investors are now turning their attention to upcoming Federal Reserve commentary and the preliminary University of Michigan Consumer Sentiment report, due later this week.
Technical Outlook: Bulls Eye Key Resistance
From a technical perspective, the gold recovery remains vulnerable unless bulls can secure a sustained daily close above the $3,200 threshold. To gain further momentum, XAU/USD must break above the May 14 high of $3,257, potentially opening the door for a retest of the $3,300 level and a reduction in weekly losses.
However, momentum indicators, including the Relative Strength Index (RSI), suggest a continued bearish bias, raising the possibility that the current rebound is merely a correction within a broader downtrend.
A close below $3,200 would likely expose further downside, with the 50-day Simple Moving Average (SMA) at $3,155 acting as the next support, followed by $3,100.
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