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Gold price rallied sharply on Thursday after hitting a weekly low of $3,120, posting solid gains of over 1.40%, boosted by broad US Dollar weakness due to a nifty Producer Price Index (PPI) report in the United States (US). This, along with falling US bond yields, keeps XAU/USD trading at $3,228 at the time of writing.

The yellow metal began to rise in anticipation of US PPI data, which in April came surprisingly below estimates and March’s data. At the same time, Retail Sales for the same period slowed as households front-loaded motor vehicle purchases, and job data revealed by the US Department of Labor showed that the number of Americans filing for unemployment claims was in line with estimates.

The data triggered a reaction in the fixed-income markets, prompting markets to fully price in two interest rate cuts by the Federal Reserve (Fed) in 2025, with the first one expected in September.

Another reason behind Gold’s advance might be Russian President Vladimir Putin's reluctance to meet with Ukrainian President Volodymyr Zelenskyy in Turkey to discuss a resolution of their conflict.

Given the fundamental backdrop, Gold is set to extend its gains. However, the US-China trade war de-escalation was a headwind for the yellow metal, which witnessed a loss of over $120 as XAU/USD’s prices drifted to $3,200.

Ahead this week, the US economic docket will feature housing data, and traders will eye the University of Michigan Consumer Sentiment preliminary survey for May.

Daily digest market movers: Weak US data and collapsing US yields push Gold up

• The US PPI in April fell unexpectedly by -0.5% MoM, missing an estimate of a 0.2% increase. The core PPI dropped by -0.4%, below forecasts of a 0.3% expansion.
• April Retail Sales in the US increased by 0.1% MoM after March’s figures were upwardly revised to 1.7%. Economists had expected the numbers to remain unchanged compared to the previous month.
• US Initial Jobless Claims for the week ending May 10 rose by 229,000, as expected, unchanged from the previous week.
• US Treasury bond yields are plummeting, with the US 10-year Treasury note yield edging nine basis points lower to 4.49%. Meanwhile, US real yields followed suit, down nine and a half bps to 2.077%.

XAU/USD technical outlook: Double top at risk of being negated

From a technical standpoint, Gold’s bounce could be short-lived if buyers fail to achieve a daily close above $3,200. In that case, they need to surpass the May 14 peak of $3,257 to remain hopeful of testing $3,300 and trimming weekly losses. Nevertheless, momentum favors further downside, as depicted by the Relative Strength Index (RSI). Traders should be cautious that the ongoing leg up could be a correction of an ongoing downtrend.

On the other hand, if XAU/USD closes daily below $3,200, further downside is expected, with the 50-day Simple Moving Average (SMA) at $3,155 serving as the next support level, followed by $3,100.

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