Gold futures are trading below key support levels after a stronger-than-expected US producer price report pushed up the odds of a Federal Reserve rate hike this month. The pressure builds alongside a surge in oil prices tied to the US-Iran war, which is also feeding inflation in Europe.
Gold futures traded below their targeted key support levels on Thursday, extending the technical picture flagged in a prior analysis published seven hours earlier.
PPI beat lifts rate-hike odds
The Bureau of Labor Statistics reported headline producer prices rose 0.4% M/M and 5.4% Y/Y in August, above consensus estimates of 0.4% and 5.3%. July's figures were revised up to 0.1% M/M and 4.8% Y/Y. Core PPI rose 0.2% M/M and 4.6% Y/Y, slightly below the 0.3% and 4.6% forecast.
As a result, the probability of a quarter-point Fed rate hike on September 16 rose to 74%, up from about 64% before the data. Treasury yields moved higher too: the 10-year yield added 8.4 basis points to 4.921%, while the 2-year yield rose 8.5 basis points to 4.512%.
Oil surge adds to inflation pressure
Brent crude has also been climbing. The global benchmark traded above $102 a barrel on Thursday, its first move back above $100 since May. Escalating US-Iran hostilities have raised concerns about disruptions through the Strait of Hormuz.
The European Central Bank raised its benchmark rate by a quarter point to 2.50% on Thursday to cool inflation fed by higher energy costs. Eurozone inflation came in at 3.3% in August, above the bank's 2% target.
War in its 195th day
The war between the US and Iran has now run for 195 days, and Iran has reportedly used a trade scheme with China to exchange oil for imports including military gear, according to Reuters, allowing it to work around US sanctions. The report followed US strikes on Iranian crude-oil tankers on Tuesday as the two sides traded heavy strikes in the Persian Gulf.
With both the rate outlook and oil prices working against it, gold remains under pressure below its charted support level heading into next week's Fed meeting.
Source: Investing.com (Commodities Analysis & Opinion)
Trading involves risk.
Risk Disclaimer
