Can Gold Hold Above $3,200 as Weak PPI Data Fuels Rate Cut Hopes?

Gold prices rebounded above the $3,200 mark on Thursday, gaining 1.22% to trade at $3,217 during the North American session, as weaker-than-expected US economic data revived speculation of Federal Reserve rate cuts. The Producer Price Index (PPI) for April unexpectedly dropped by 0.5% month-over-month, missing forecasts of a 0.2% rise, while core PPI fell 0.4% against expectations of a 0.3% increase. Retail Sales also disappointed, growing just 0.1% compared to March’s revised 1.7%, signaling that consumer spending is faltering under the weight of US tariffs, a trend that hints at broader economic softness and supports gold’s recovery from a five-week low of $3,120.

The US Dollar Index (DXY) slipped 0.15% to 100.88, reflecting the Greenback’s weakened stance after the data release, which bolstered gold’s appeal as a safe-haven asset. Market expectations for Fed rate cuts in 2025 rose to 53 basis points, up from 48.5 basis points the previous day, driven by signs of decelerating factory-gate inflation and sluggish consumer activity. Initial Jobless Claims for the week ending May 10 held steady at 229,000, meeting expectations but offering little relief to the broader economic narrative, which continues to point toward a slowdown that could prompt the Fed to ease policy sooner than anticipated.

The recent US-China 90-day tariff suspension, reducing duties to 30% on Chinese imports and 10% on US goods, had initially pressured gold prices, driving a $120 drop from $3,326 to $3,207 as risk appetite improved. However, Thursday’s data has shifted the focus back to economic vulnerabilities, allowing gold to reclaim ground. US stock markets showed mixed responses, with the S&P 500 up 0.8% at 5,888 points and the Nasdaq gaining 1.5% to 18,979 points on Tuesday, while the Dow dipped 0.4% to 42,256 points, reflecting cautious optimism tempered by economic concerns that continue to favor gold as a hedge.

Looking ahead, the US economic calendar will feature additional Fed speeches and the University of Michigan Consumer Sentiment index, which could further influence gold’s trajectory. From a technical perspective, gold’s current bounce may face resistance if it fails to close above $3,200, with the next hurdle at the May 14 peak of $3,257. A break above this level could signal a push toward $3,300, but momentum indicators suggest the uptick might be a correction within a broader downtrend, cautioning traders against over-optimism. As economic indicators continue to shape market sentiment, gold’s ability to hold this recovery will depend on whether the Fed’s policy outlook aligns with growing expectations of monetary easing.