Gold price forecast: PPI data dampens gold rally amid inflation concerns
Prices fell 1.8% to trade below $2,700 per ounce
Gold’s four-day rally came to a halt on Thursday, following stronger-than-expected U.S.
Producer Price Index (PPI) data that fueled concerns over a more hawkish Federal Reserve. Prices fell 1.8% to trade below $2,700 per ounce after encountering resistance at $2,720, where a double top formation emerged.
Gold price dynamics (September-December 2024). Source: TradingView.
As the US dollar gained traction, driven by doubts over the long-term inflation outlook, gold’s recent price movements reflected a shift in market sentiment. The PPI, which exceeded forecasts by rising 0.4% in November well above the 0.2% gain expected, suggests that the disinflation trend may be stalling. This prompted traders to reassess their expectations for future Federal Reserve rate cuts.
Gold outlook: Continued uptrend expected despite short-term volatility
Despite gold's recent pullback, it remains supported by several key factors. Year-to-date, the precious metal has surged 25%, fueled by robust safe-haven demand, central bank purchases, and the ongoing impact of previous Fed rate cuts. This rally has seen gold reach new highs in 2024, but as the dollar strengthens and inflation concerns persist, gold has struggled to maintain momentum in the short term.
Currently, gold is trading around $2,680, near the 200-day Exponential Moving Average (EMA) support level at $2,660. The Relative Strength Index (RSI) remains in overbought territory, signaling that further downside risk could be ahead in the near term. However, ING analysts suggest that despite the recent losses, the upward momentum in gold prices is likely to persist into 2025, with expectations for new highs driven by continued global uncertainties and central bank activity. While gold faces resistance and short-term volatility, the broader trend remains positive, with several key factors pointing toward a continued uptrend in the medium to long term.
Gold rally breaks key resistance levels, with prices surging past $2,700, marking a five-week high. The surge in gold prices is driven by a shift in U.S. Federal Reserve policy and China’s economic strategy.
