Gold crashes below $4,900 as hot PPI, Oil spike fuel USD rally
Gold (XAU/USD) tumbles by more than 2.20% on Wednesday as tensions in the Middle East rise and US inflation edges up, which could deter the Federal Reserve from easing policy. At the time of writing, the XAU/USD trades at $4,878 after hitting a daily high of $5,016.
Bullion sinks as rising US yields, inflation fears dent Fed cut expectations
Price action shows the yellow metal is under pressure as it fell below the 50-day Simple Moving Average (SMA) at $4,961. Conversely, the US Dollar Index (DXY), which measures the buck's performance against six other currencies, rose 0.29% to 99.84, due to its close correlation with Oil prices.
Before Wall Street opened, Israel revealed an attack on Iran's Pars gas field facilities. This prompted a reaction by Tehran, which threatened to strike the enemy's infrastructure and warned that energy installations would be targeted "in the coming hours." This event pushed Western Texas Intermediate (WTI), the US Crude Oil benchmark, up by 0.72% to $96.64 per barrel.
The US economic docket featured February's Producer Price Index (PPI), which came in hotter than expected, reducing the chances of a Federal Reserve rate cut in 2026. The PPI in February expanded to 3.4% YoY, missed the forecast and January's 2.9% reading. Core PPI, which excludes volatile items, jumped from 3.5% to 3.9% YoY for the same period.
After the data, money markets seem less convinced that the Fed will cut rates at all in 2026. As of writing, the swaps markets priced 18.5 basis points of easing towards the end of the year, fueled by high energy prices sparked by the Middle East conflict.
Recently, Factory Orders for January showed weakness, rising 0.1% MoM after an upwardly revised -0.4% drop in the previous month, the US Commerce Department reported.
Looking forward, traders are bracing for the Federal Reserve's policy announcement. The US central bank will likely keep rates steady as it shares its economic forecasts for the year. Investors will also pay close attention to the "dot-plot," which shows how Fed officials predict interest rates will move.
Following the release, traders' eyes would be on the Fed Chair Jerome Powell's press conference.
XAU/USD Price Forecast: Poised to test lower prices if it cracks $4,800
Gold's technical picture remains bullish-biased, but in the short term, the breach of the 50-day SMA opened the door to a fall below $4,900.
Momentum, as measured by the Relative Strength Index (RSI), shows that bears are gathering some steam, as it has continued to drop deep into oversold territory.
For a bullish resumption, Gold buyers must clear the 50-day SMA at $4,961 before testing the $5,000 milestone. If breached, the next area of interest would be the $5,100 figure, followed by the March 10 high at $5,238.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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