• In response to the unexpectedly high US producer inflation and the strengthening US dollar, gold is seeing a modest retreat.
• Rising US Treasury yields and the Dollar Index indicate a reevaluation of the Federal Reserve’s monetary policies by the market.
• The US economy remains robust, as evidenced by data on retail sales and initial jobless claims, which lowers the intraday price of gold.

Following a hotter-than-expected Producer Price Index (PPI) report on Wednesday, traders started pricing in a less “dovish” Federal Reserve, which caused gold prices to pare some of their gains from Wednesday. As a result, the US Dollar gained support as the yield on US Treasury bonds increased. As of this writing, XAU/USD is trading at approximately $2,160.00, up 0.50% from the previous close.

US stocks had a losing session’s end. The US Department of Labour had earlier revealed that producer-side inflation had increased. Meanwhile, US retail sales demonstrated that consumers were still strong, and the number of people applying for unemployment benefits fell short of projections and the prior reading.

Investors reduced their wagers that the Fed would lower rates at the June meeting due to uncertainty about the US central bank’s policy prospects. The US Dollar Index (DXY), which measures how well the US dollar is performing relative to other currencies, is up 0.54% to 103.33, while the yield on US 10-year Treasury bonds jumps ten basis points to 4.29%. In the meantime, the yellow metal remains stagnant.

Daily digest market movers: With the USD strengthening, gold merchants are being cautious

• The core PPI remained at 2%, but the PPI was strong, rising from 0.9% to 1.6% YoY, both above consensus.
• The US Department of Commerce reported that Retail Sales increased by 0.6% over the previous month, which was an improvement over the predicted 0.8% MoM reading.
• Initial Jobless Claims for the week ending March 9 decreased from 210K to 209K, below predictions of 218K, indicating that the labor market remained tight.
• Fed officials should not loosen monetary policy in light of the US consumer and producer price indices, which suggest reaccelerating inflation.
• Fed Chairman Jerome Powell stated that inflation is declining during his speech before the US Congress last week, but he also acknowledged that policy may be eased later in the year. He stressed that it would depend on new data to reassure decision-makers that inflation is steadily approaching the Fed’s 2% target. The Fed will meet again next week, March 19–20.
• The CME FedWatch Tool indicates that while the probability of a May rate cut has decreased from 22% to 11%, it is still low. But June’s chances are now at 64%, down from 72%.

Technical analysis: Below $2,170.00, gold buyers pause

The price of gold is still leaning upward on Thursday, but over the past three days, it has stabilized around the $2,160–$2,180 region, failing to breach the upper end of the range and move towards $2,200.00. It should be noted that the Relative Strength Index (RSI) indicator, which shows a decline in buying momentum, is poised to break below the 70-point level. If that happens, XAU/US might plunge to $2,150.00.

The low of $2,123.80 on March 6 and $2,100.00 the following day indicate more declines. If the latter is breached, the highs from December 28 at $2,088.48 and February 1 at $2,065.60 will be revealed.

Conversely, a bullish continuation would occur if buyers recaptured the $2,184.76 high on March 12. The year’s high, $2,195.15, would be the next target, followed by $2,200.00.