Gold rebounded on Friday after sinking nearly 2% the previous session, as a hotter-than-expected US producer price reading and a jump in oil prices kept Federal Reserve rate-hike bets alive. The metal remains on track for a third straight weekly decline even as near-record ETF inflows keep longer-term demand intact.
Gold clawed back toward $4,350 an ounce on Friday, recovering part of the ground lost in a sharp Thursday sell-off as a weaker dollar offered some relief. At 01:59 ET, XAU/USD rose 0.8% to $4,351.28 an ounce, while Gold Futures fell 0.4% to $4,391.37. Silver and platinum moved higher too, with XAG/USD up 0.8% to $64.10 an ounce and XPT/USD up 1.1% to $1,801.18.
Hot PPI and oil prices revive Fed hike bets
The bounce came a day after gold dropped 1.8%, leaving bullion on track for a third consecutive weekly decline. The renewed pressure followed data showing US producer prices rose 0.4% in August, the strongest increase since May, reinforcing concerns that rising energy costs are feeding into broader inflation just days before the Fed's policy decision.
Oil has become a key part of that inflation story. Brent crude climbed close to $108 a barrel as the United States and Iran show little sign of backing away from a prolonged conflict, with fighting intensifying in recent weeks. As a result, markets are now pricing roughly a 70% chance of a Fed rate hike this month.
ETF demand provides longer-term support
Despite the near-term pressure, gold continues to draw substantial investment demand. The World Gold Council said global physically backed gold ETFs attracted $18 billion in August, their second largest monthly inflow on record. Holdings increased by 121 tonnes to a record 4,189 tonnes, while assets under management jumped 16% to $615 billion. That demand helped gold gain 13% in August, its third strongest monthly return in a quarter century, according to the World Gold Council.
Tony Sycamore, senior market analyst at IG, said gold remains well below its 200-day moving average near $4,537 and needs to reclaim that level to signal the pullback from the $4,697 high is ending; until then, he sees scope for a deeper decline toward $4,200.
Technical levels to watch ahead of CPI
Gold's 10-day correlation with US two-year yields has strengthened to around -0.81, even as bullion has held up better than that relationship would suggest given the scale of the recent bond sell-off. On September 10 alone, two-year Treasury yields jumped 12.3bp, one of the largest daily moves in that maturity since 2010. Analysts flag $4,283 as the key downside level ahead of the US CPI report, with a break below opening the way toward $4,220 and then $4,165.
On the upside, other technical analysis points to $4,310 as the support level from which gold rebounded, with a daily close above the 50-day moving average at $4,334 needed to confirm an advance toward $4,510 resistance, and a possible final target near the 200-day moving average around $4,540.
Sources: Investing.com, Investing.com Analysis, Investing.com Analysis (snippet-based)
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