The price of Gold has strengthened to $2,764 following the release of US producer inflation data (Producer Price Index/PPI), which came in below market expectations. This month’s PPI data recorded a rise of 0.2%, underperforming the anticipated 0.3%. This figure suggests that inflationary pressures at the producer level are starting to ease, reducing expectations for further interest rate hikes by the Federal Reserve.
The lower PPI data has exerted downward pressure on the US dollar and government bond yields, which typically move inversely to Gold prices. A weaker dollar makes Gold more appealing to investors using other currencies.
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Nonetheless, investors remain cautious as the market awaits additional economic data that could influence Fed policy, such as consumer inflation (CPI) figures and labor reports. Should these data points indicate higher inflation pressures, expectations for interest rate cuts could be postponed, potentially limiting Gold’s upward momentum.
In addition to Gold, major currency pairs also responded positively to the data, with GBPUSD rising to 1.2165 and EURUSD climbing to 1.0273.
