Some rebound in stock markets caps the safe-haven gold’s upside potential as well
Gold prices plunged to the $1,820 zone on Thursday as the dollar rallied to fresh twenty-year highs just below the 105.00 handle. The non-yielding metal stays pressured by the rallying greenback amid the elevated inflation in the United States that pushes the Federal Reserve to more aggressive tightening.
The US PPI for April came in higher than expected on a yearly basis while the monthly figure matched the 0.5% consensus. The dollar added to gains following the release as the overall report confirms the need for further rate hikes at a rapid pace. However, the 105.00 figure deterred the USD bulls as the index came under some pressure on Friday. So far, the buck derives support from the 104.50 zone that capped the correction earlier in the day.
As such, the XAUUSD pair dipped to fresh three-month lows around $1,810 earlier in the day before bouncing slightly. The yellow metal now holds below the 200-DMA, currently at $1,835, suggesting the recovery potential is limited for the time being as dollar demand could reemerge anytime soon. Also, some rebound in stock markets caps the safe-haven gold’s upside potential.
Should the bullion fail to hold above the mentioned lows in the near term, the $1,800 handle will come into the market focus. Failure around this threshold would pave the way towards the yearly bottom around $1,780.
On the upside, decisive recovery above the 20- and 100-DMAs ($1,893-$1,890) would help ease the selling pressure surrounding the yellow metal. In general, the outlook for gold stays bearish as long as the dollar continues to refresh multi-year highs due to geopolitical concerns coupled with Fed’s hawkish policy.