Gold (XAU) Price Forecast: CPI Data Fuels Rate Cut Bets, Will PPI Cement a Breakout?

Gold Prices Edge Lower as Markets Await US PPI and ECB Decisions

Gold prices are trading slightly lower on Thursday following a failed attempt to break above the critical resistance level of $2721.42. The metal is currently supported by a Fibonacci level at $2693.40, with additional support at $2671.22 and $2663.51, formed by the 50-day moving average and a 50% retracement level. While the upside remains open with the all-time high of $2790.17 as a potential target, a strong catalyst is needed to drive significant buying.

At 12:00 GMT, XAU/USD is trading $2710.89, down $7.36 or -0.27%.

Inflation Data Fuels Rate Cut Expectations

Gold recently hit a five-week high, supported by the latest US Consumer Price Index (CPI) data, which indicated a 0.3% monthly rise in November—its largest since April. Core inflation, excluding food and energy, also increased by 0.3%, meeting market expectations. These results have reinforced the likelihood of a Federal Reserve rate cut at its upcoming policy meeting, with CME’s FedWatch tool showing a 98% probability of a quarter-point reduction in rates.

Lower interest rates generally benefit gold by reducing the opportunity cost of holding non-yielding assets. However, rising risk appetite has tempered gains, as traders eye further data, including the US Producer Price Index (PPI) report and weekly jobless claims data due later today.

ECB Expected to Maintain Dovish Stance

In Europe, the European Central Bank (ECB) is widely expected to cut rates again and signal continued easing into 2025. The ECB’s decision could further boost gold, as dovish monetary policies tend to enhance bullion’s appeal.

Geopolitical Developments Support Gold’s Safe-Haven Appeal

Ongoing geopolitical tensions in Gaza, where renewed ceasefire efforts are underway, continue to underline gold’s role as a safe-haven asset. However, steadier US Treasury yields and stable markets have kept gold’s movements subdued.

Market Forecast: Cautiously Bullish

Gold remains poised for buying opportunities on dips, particularly if upcoming PPI data and ECB decisions reinforce expectations of extended low interest rates. However, for a breakout above $2721.42 and a push toward the all-time high of $2790.17, stronger economic or geopolitical drivers will be necessary. Traders should watch for further clarity from the Fed’s upcoming policy meeting next week, which could provide the needed momentum.

More Information in our Economic Calendar.