Gold price recovers further from one-month low; looks to US PPI and Powell for fresh impetus

Gold price (XAU/USD) is looking to build on its modest intraday bounce from the $3,120 area, or the lowest level since April 10, touched earlier this Thursday, as a turnaround in the global risk sentiment boosts demand for traditional safe-haven assets. Apart from this, the emergence of some US Dollar (USD) selling turns out to be another factor lending support to the precious metal. Any meaningful recovery, however, now seems elusive in the wake of the optimism led by the de-escalation of the US-China trade war.

Meanwhile, traders have been paring their bets for a more aggressive policy easing by the Federal Reserve (Fed) amid easing fears about a US recession, which has been pushing the US Treasury bond yields higher. This should act as a tailwind for the USD and cap the upside for the non-yielding Gold price. Traders might also refrain from placing aggressive bets ahead of the US Producer Price Index (PPI). Furthermore, Fed Chair Jerome Powell's speech might provide some meaningful impetus to the XAU/USD pair.

Daily Digest Market Movers: Gold price attracts some safe-haven flows; upside potential seems limited

• US President Donald Trump said on Thursday that Iran has agreed to terms; we want them to succeed, and that we are getting very close to getting a deal with Iran. Trump added that he might go to the Russia-Ukraine talks in Turkey on Friday if it's appropriate.
• This adds to the optimism led by the US-China agreement to slash steep tariffs for at least 90 days. Moreover, Trump said on Tuesday that he could see himself dealing directly with Chinese President Xi Jinping on the details of a trade pact.
• This helps to ease market concerns about a downturn in the world's largest economy and drags the safe-haven Gold price to over a one-month low on Thursday amid expectations of fewer interest rate cuts by the Federal Reserve.
• Traders are now pricing in a little over 50 basis points of Fed rate cuts for the year, down from over a full percentage point of reductions priced in last month. This lifts the benchmark 10-US Treasury yield to its highest in a month.
• Fed Vice Chair Philip Jefferson warned that announced tariffs and the uncertainty surrounding U.S. trade policy could derail any recent progress on inflation. Jefferson added that the recent inflation data show further progress toward the 2% target and described the current policy stance as well-positioned to respond to developments that may arise.
• Adding to this, Chicago Fed President Austan Goolsbee noted that some parts of the April inflation report represent the lagged nature of the data, and it will take time for current inflation trends to show up in the data. Goolsbee added that right now is a time for the US central bank to wait for more information, try to get past the noise in the data.
• Separately, San Francisco Fed President Mary Daly said that the US economy and the labor market are solid, and inflation is declining. With monetary policy moderately but not overly restrictive, the US central bank can wait to adjust interest rates amid the uncertainty and respond to whatever comes into the economy, Daly added further.
• The US Dollar bulls, however, seem reluctant and opt to wait for the release of the US Producer Price Index, due later during the North American session. Apart from this, Fed Chair Jerome Powell's appearance will be looked upon for cues about the future rate-cut path, which will drive the USD and provide a fresh impetus to the XAU/USD pair.
• Ukrainian President Zelenskyy had said he would surely attend the first peace talks with Russia, scheduled this Thursday in Istanbul. The Kremlin, however, announced that Russian President Vladimir Putin will skip the meeting.
• The Israeli military said on Wednesday that it intercepted a missile launched from Yemen towards its territory. In a further escalation of violence in the region, an intense wave of Israeli bombing on Wednesday killed as many as 80 people in Gaza. This keeps geopolitical risks in play, though it does little to lend any support to the precious metal.

Gold price could attract fresh sellers near the 61.8% Fibo. level support breakpoint, around $3,265-3,266

From a technical perspective, the overnight breakdown through the $3,200 mark and a subsequent slide below the 61.8% Fibonacci retracement level of the strong move up in April could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction, suggesting that the Gold price could extend the fall further towards the $3,135-3,133 support. Some follow-through selling has the potential to drag the XAU/USD pair further towards the $3,100 mark, which, if broken, might expose the next relevant support near the $3,060 region.

On the flip side, attempted recovery above the $3,168-3,170 region (61.8% Fibo. level) might now confront stiff resistance ahead of the $3,200 mark, or the Asian session peak. Any further move up might now be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $3,230 area, or the 50% retracement level. The latter should act as a pivotal point, above which a fresh bout of short-covering move could lift the Gold price to the $3,265 intermediate hurdle en route to the $3,300 round figure (38.2% Fibo. level).

(This story was corrected on May 15 at 08:02 GMT to say that the Gold price touched its lowest level since April 10 earlier this Thursday, not Friday)