On Thursday, May 14, during the early Asian trading session, spot gold traded within a narrow range around $4690. In the previous session, the market opened at $4715, initially experiencing a slight uptick to a daily high of $4726 before a strong pullback ensued. The price subsequently dropped to a daily low of $4669, followed by a late-session rebound, ultimately closing at $4688. This price action resulted in a daily candlestick with a moderate bearish body and equal-length upper and lower shadows.
Fundamental Factors: The key negative for gold prices stemmed from the hotter-than-expected US Producer Price Index (PPI) data for April, released on May 13. The data showed the annual PPI surged to 6.0%, significantly exceeding the market consensus of 4.9% and marking the highest level since December 2022. On a monthly basis, PPI jumped 1.4%, the largest increase since 2022. Core PPI also rose sharply, with annual and monthly figures of 5.2% and 1.0%, respectively, both well above forecasts. This report highlights a broad-based rebound in inflation at the producer level. Following the stronger-than-anticipated Consumer Price Index (CPI) data earlier in the week, this marks the second robust inflation report, further diminishing market expectations for a Federal Reserve rate cut this year to below 10%, while increasing the probability of a 25 basis point rate hike by year-end to over 30%. Consequently, the US Dollar Index and the 10-year Treasury yield strengthened, with the latter climbing to around 4.48%, reaching its highest level since July 2025.
In other news, the US Senate officially confirmed Kevin Warsh as the next Chairman of the Federal Reserve. The Senate voted 54 to 45 to approve his appointment. The Senate had previously approved Warsh's nomination as a Federal Reserve Governor on May 12, for a 14-year term. With the Chairman appointment confirmed on May 13, Warsh is set to formally assume his role after completing the necessary White House procedures, succeeding current Chairman Jerome Powell, whose term concludes this Friday, May 15. Powell is expected to remain on the Federal Reserve Board as a Governor.
On the morning of May 14, the Chinese President held talks with US President Donald Trump at the Great Hall of the People in Beijing, who is visiting China for a state visit. Accompanying President Trump were not only business leaders such as Nvidia's Jensen Huang and Elon Musk but also numerous senior US officials. The primary agenda for this summit is focused on trade and market access issues, with markets also closely monitoring the potential broader geopolitical implications of this meeting.
Technical Analysis: From a daily chart perspective, gold has recently been oscillating around the moving average cluster. Its failure to break below the 10-day moving average indicates relative strength, though this strength is largely influenced by external factors such as a corrective pullback in the US Dollar and geopolitical developments. For the day, a continuation of the range-bound movement is anticipated. On the upside, focus will be on the short-term resistance near the 5-day moving average around $4710. On the downside, key support is seen around the 10-day moving average near $4660. A decisive break below the 10-day line would signal a breach of the moving average support cluster. In the absence of positive fundamental catalysts, this could potentially usher in a short-term corrective phase for gold.
Examining the 1-hour chart, gold exhibited a brief rebound during yesterday's early session but subsequently trended weaker, with the hourly chart structure's center of gravity shifting lower. This suggests a prevailing inclination towards corrective action. The current hourly trading range has further contracted. For the day, a continuation of oscillation within the $4710-$4660 range is expected. However, the risk of a decisive directional move is increasing in the near term, making it crucial to monitor potential unexpected news-driven risks over the next two days.
Today's Trading Strategy: During the Asian and European sessions, consider short-term trades within the $4710-$4660 range, employing both buy-low and sell-high approaches. Should price action break out of this range due to significant news developments, adjust the strategy accordingly based on the new market conditions.
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