Gold (XAU/USD) and Silver (XAG/USD) both declined on Thursday as traders digested softer US inflation data and shifting expectations for Federal Reserve (Fed) interest rate policy. Gold fell 1% to $4,365 after reaching a daily high of $4,449, while Silver traded around $64.00, down 0.80% on the day [1][2]. The US Dollar Index (DXY) recovered from earlier losses and traded nearly flat around the 100.00 level, providing additional headwinds for both metals [1][2].
US economic data showed the Producer Price Index (PPI) declined from 5.5% to 4.7% year-over-year, with Core PPI (excluding food and energy) rising 4.2% as expected, down from 4.7% in June [1]. Weekly jobless claims increased to 209,000, surpassing forecasts of 202,000 [1]. These figures contributed to a reduction in market expectations for a near-term Fed rate hike, with traders now assigning a 40% probability to a 25-basis-point increase and a 60% chance of rates being held steady [1].
Despite the softer inflation data, both gold and silver failed to rally, as traders appeared reluctant to push prices higher. For gold, technical indicators such as the Relative Strength Index (RSI) suggested fading bullish momentum, with the metal consolidating below the $4,400 threshold and testing new three-day lows at $4,351 [1]. Key support levels for gold are identified at $4,300, $4,202, $4,145 (50-day SMA), and $4,100 [1]. Silver, meanwhile, held above its 50-day Simple Moving Average (SMA) at $61.42, with momentum indicators pointing to a potential period of consolidation [2]. Resistance for silver is seen at the 100-day SMA ($68.80) and 200-day SMA ($71.56), while support lies at $61.42 and $60.00, with a deeper pullback potentially exposing $55.00 [2].
Federal Reserve officials remained divided on the path forward. Cleveland Fed's Beth Hammack advocated for higher rates to curb growth and inflation, while Richmond Fed President Thomas Barkin described the need for a rate hike as an "open question" given that inflationary pressures stem from shocks that "should pass" [1]. The July inflation readings are seen as delaying, but not eliminating, the possibility of another rate hike, especially as the inflation outlook remains uncertain and energy-driven price pressures could reemerge [2].
Looking ahead, market participants are awaiting Friday's release of July Retail Sales and the University of Michigan Consumer Sentiment for further direction [1].
CONCLUSION
Both gold and silver prices retreated as softer US inflation data and a recovering US Dollar tempered expectations for an imminent Fed rate hike. Technical indicators for both metals suggest a period of consolidation, with traders cautious amid ongoing uncertainty about the inflation outlook and Fed policy. Upcoming US economic data may provide further clarity on the metals' next moves.