Gold prices surged nearly 2% to $3,240 per ounce amid economic uncertainty and geopolitical tensions, signaling strong investor confidence despite recent market volatility.
At a Glance
- Gold rebounded from a five-week low of $3,120 to trade above $3,200 following weaker-than-expected US economic data
- US Producer Price Index unexpectedly fell 0.5% month-over-month in April, the first decline in five years
- Gold has risen over 22% this year due to ETF demand, central bank purchases, and Chinese investment
- Geopolitical tensions, particularly skepticism over Russia-Ukraine peace talks, contribute to gold’s appeal as a safe-haven asset
- Analysts identify support levels around $3,050-$3,150 per ounce if corrective movements occur
Economic Data Boosts Gold’s Appeal
Gold prices staged an impressive recovery during North American trading hours after US economic data revealed decelerating factory gate inflation and weakened consumer spending. The precious metal, which had previously hit a five-week low of $3,120, bounced back strongly to trade at $3,202, representing a 0.82% gain. This rebound comes as the US Dollar Index (DXY) retreated by 0.15% to 100.88, making dollar-denominated gold more attractive to international buyers.
The US Producer Price Index (PPI) for April fell by 0.5% month-over-month, significantly missing economists’ expectations of a 0.2% increase. Similarly, core PPI dropped by 0.4%, well below the forecast of a 0.3% expansion. Retail Sales data also disappointed, edging up by just 0.1% month-over-month, while Initial Jobless Claims for the week ending May 10 rose by 229,000, matching expectations. This combination of weaker economic indicators has strengthened market expectations for Federal Reserve rate cuts.
Gold prices surge over 2% amid geopolitical tensions and U.S. market volatility ahead of key Federal Reserve meeting, while trade concerns linger.
Noteworthy macro moves today: Gold +2.1%. Copper +1.7%. S&P 500 Index (US) -0.8%. Noteworthy US mega-cap moves today: Berkshire…— MarketReader (@marketreaderinc) May 5, 2025
Geopolitical Tensions Provide Additional Support
Gold’s status as a safe-haven asset continues to gain traction amid ongoing geopolitical uncertainties. Skepticism over progress in Russia-Ukraine peace talks has emerged as a significant factor supporting gold prices. The absence of Russian President Vladimir Putin from direct peace negotiations in Turkey has dampened expectations for a meaningful resolution to the conflict, causing investors to seek refuge in precious metals as a hedge against potential escalation.
“Putin not attending the peace talks in Turkey dims expectations of progress towards a peace deal, which I think is helping to underpin gold prices today,” said Zaner’s Grant.
Meanwhile, investors remain cautious about US-China trade tensions despite a temporary tariff deal. Recent positive developments in US-Iran relations regarding nuclear program negotiations have yet to significantly impact gold prices, as market participants continue to focus on broader economic indicators and monetary policy implications. The combined effect of these global uncertainties has reinforced gold’s traditional role as a store of value during troubled times.
Technical Outlook and Future Prospects
Gold’s impressive 22% rise this year has been driven by increased demand for bullion-backed ETFs, substantial central bank purchases, and strong Chinese speculative interest. However, technical indicators suggest caution may be warranted in the short term. The Relative Strength Index (RSI) points to a potential ongoing downtrend, indicating that gold’s recent bounce may be short-lived if prices fail to consistently close above the critical $3,200 level.
“Thursday’s data creates more room for the Fed to cut rates, with a more dovish expectation building in the market,” added Peter Grant.
Market participants now expect the Federal Reserve to ease policy by approximately 53 basis points in 2025, which would further enhance gold’s appeal as a non-yielding asset. For gold to target the $3,300 level, it must first surpass resistance at $3,257. If XAU/USD closes below $3,200, further downside may be expected, with the 50-day Simple Moving Average at $3,155 serving as the next support level, followed by $3,100. Analysts suggest potential support in the range of $3,050 to $3,150 per ounce if a corrective movement materializes.
