The Fed was suddenly "slapped in the face" by data: PPI soared to a 3-year peak, and the gold 3330 defense line faced the ultimate test
2025-08-15 13:47:36
Spot gold rebounded slightly on Friday (August 15) and is currently trading around $3,344 per ounce. Gold prices fluctuated and weakened on Thursday, falling below the $3,330 mark at one point, hitting a nearly two-week low, as strong U.S. producer price index (PPI) and initial jobless claims data drove a rebound in the U.S. dollar.
The US Producer Price Index (PPI) data for July sent shockwaves through the market, with the 0.9% month-over-month increase not only marking the largest monthly increase since June 2022 but also exceeding market expectations by five times. This shocking report indicates that inflationary pressures are accelerating from the production side, with the core PPI, in particular, jumping to 3.7% year-over-year, a 110 basis point surge from the previous reading and the largest increase since 2021. Detailed data also revealed a 39% monthly surge in fresh vegetable prices, with meat and energy prices also climbing. These trends are closely linked to supply chain disruptions caused by recent extreme weather and geopolitical conflicts.
As the countdown to the US-Russia Alaska summit approaches, market nerves remain on edge. President Trump's tough remarks at the Kennedy Center have sparked multiple interpretations: on the one hand, the "very severe consequences" hint at the possibility of escalating energy and financial sanctions against Russia, while on the other, they leave room for a potential diplomatic breakthrough. According to White House insiders, the US may propose a "phased withdrawal" plan, but Kremlin spokesman Dmitry Peskov immediately stated that "red lines cannot be crossed." This dualistic outlook of "war and peace" has created a rare tug-of-war between gold's safe-haven properties and US dollar liquidity, reflecting price fluctuations in the $3,330-3,370 range.
While some market participants see the talks as an opportunity to ease tensions, others worry that an escalation could reignite safe-haven buying in gold. A breakdown in the talks would likely exacerbate market concerns about a worsening geopolitical situation—particularly if the United States follows through on its threat of retaliatory measures against Russia, which could further spread panic.
Market Trends
The US dollar index (DXY) rebounded on Thursday, rebounding 0.4% from a more than two-week low to close at 98.18. In Asian trading on Friday, the DXY retreated slightly, currently trading around 98.03, down about 0.16%. The index reclaimed the psychological level of 98.00 after hitting a more than two-week low. Stronger-than-expected PPI data and flat initial jobless claims are prompting traders to reassess the prospects for a Federal Reserve rate cut. The index measures the dollar's performance against six major currencies.
U.S. Treasury yields stabilized after falling on Wednesday, with the benchmark 10-year yield rising to 4.30% on Thursday before falling slightly to around 4.27% in Asian trading on Friday. Investors are weighing strong U.S. inflation data against expectations of more interest rate cuts from the Federal Reserve before the end of the year.
According to the CME FedWatch tool, the market currently expects a 92% probability of a 25 basis point rate cut at the Federal Reserve's September meeting, down from 99% before the PPI release, but still much higher than about 60% a few weeks ago.
Federal Reserve official Mousallem said on Thursday that he expects the impact of tariffs on inflation to largely dissipate within six to nine months, but it could persist longer. He noted that tariffs are pushing up inflation and slightly raised his assessment of labor market risks while slightly lowering inflation risks. Mousallem added that current economic conditions and data do not support a 50 basis point rate cut.
U.S. Treasury Secretary Scott Besant said in a Bloomberg Television interview on Wednesday that the Federal Reserve should cut interest rates by 150-175 basis points. This came after he urged the Fed to cut rates by 50 basis points in September in a Fox Business Channel interview on Tuesday night, citing cooling inflation and downward revisions to jobs data.
Federal Reserve official Goolsbee said on Wednesday that policy will be determined "in real time" at the upcoming Fed meeting. He described tariffs as a "stagflationary shock" and expressed concern about one-off price effects. Goolsbee noted that the services inflation data in the latest CPI report was "awful," while describing the labor market as "quite solid." He added that slowing job growth likely reflects declining population growth rather than weakening demand, and stressed that a few consecutive months of favorable inflation data would be needed before a rate cut would be comfortable.
Federal Reserve official Raphael Bostic said on Wednesday that given the strong performance of the labor market, the central bank has "ample leeway" to wait and see when to adjust policy. He reiterated that he still believes it is appropriate to cut interest rates in 2025.
Initial jobless claims for the week ending August 10th are expected to be 228,000, compared to 226,000 in the previous week. Continuing claims are expected to be 1.96 million, compared to 1.974 million in the previous week. The PPI is expected to rise 0.2% month-over-month and 2.5% year-over-year in July. The core PPI is expected to rise 0.2% month-over-month and 2.9% year-over-year.
Technical analysis: Spot gold is in the 3330-3370 range, traders await US data
(Spot gold 4-hour chart, source: Yihuitong)
From the 4-hour chart, the late 21-period moving average crossed below the 55-period moving average. Spot gold is currently suppressed by the resistance of the 200-period moving average near $3347.52. The resistance of the 20-period and 100-day moving averages is near the 3350 mark, and the 55-period moving average of $3364 is the short-term resistance level, supported by the 3330 mark below.
Gold prices continue to fluctuate within the familiar range of $3,330-3,370, with the repeated lower shadows of recent candlestick patterns suggesting strong buying interest on dips. However, bulls have yet to effectively break through the upper edge of the range, and further downside risks to gold prices remain a concern.
A decisive break above the $3,370 resistance level could open the way for a test of the $3,400 psychological barrier. On the other hand, continued resistance at the 20-period moving average at $3,350 could trigger a correction towards the $3,330 support level. A break below this level would open the way for a test of the $3,300 psychological barrier.
At 13:40 Beijing time, spot gold was trading at $3345.18 per ounce.
The US Producer Price Index (PPI) data for July sent shockwaves through the market, with the 0.9% month-over-month increase not only marking the largest monthly increase since June 2022 but also exceeding market expectations by five times. This shocking report indicates that inflationary pressures are accelerating from the production side, with the core PPI, in particular, jumping to 3.7% year-over-year, a 110 basis point surge from the previous reading and the largest increase since 2021. Detailed data also revealed a 39% monthly surge in fresh vegetable prices, with meat and energy prices also climbing. These trends are closely linked to supply chain disruptions caused by recent extreme weather and geopolitical conflicts.
As the countdown to the US-Russia Alaska summit approaches, market nerves remain on edge. President Trump's tough remarks at the Kennedy Center have sparked multiple interpretations: on the one hand, the "very severe consequences" hint at the possibility of escalating energy and financial sanctions against Russia, while on the other, they leave room for a potential diplomatic breakthrough. According to White House insiders, the US may propose a "phased withdrawal" plan, but Kremlin spokesman Dmitry Peskov immediately stated that "red lines cannot be crossed." This dualistic outlook of "war and peace" has created a rare tug-of-war between gold's safe-haven properties and US dollar liquidity, reflecting price fluctuations in the $3,330-3,370 range.
While some market participants see the talks as an opportunity to ease tensions, others worry that an escalation could reignite safe-haven buying in gold. A breakdown in the talks would likely exacerbate market concerns about a worsening geopolitical situation—particularly if the United States follows through on its threat of retaliatory measures against Russia, which could further spread panic.
Market Trends
The US dollar index (DXY) rebounded on Thursday, rebounding 0.4% from a more than two-week low to close at 98.18. In Asian trading on Friday, the DXY retreated slightly, currently trading around 98.03, down about 0.16%. The index reclaimed the psychological level of 98.00 after hitting a more than two-week low. Stronger-than-expected PPI data and flat initial jobless claims are prompting traders to reassess the prospects for a Federal Reserve rate cut. The index measures the dollar's performance against six major currencies.
U.S. Treasury yields stabilized after falling on Wednesday, with the benchmark 10-year yield rising to 4.30% on Thursday before falling slightly to around 4.27% in Asian trading on Friday. Investors are weighing strong U.S. inflation data against expectations of more interest rate cuts from the Federal Reserve before the end of the year.
According to the CME FedWatch tool, the market currently expects a 92% probability of a 25 basis point rate cut at the Federal Reserve's September meeting, down from 99% before the PPI release, but still much higher than about 60% a few weeks ago.
Federal Reserve official Mousallem said on Thursday that he expects the impact of tariffs on inflation to largely dissipate within six to nine months, but it could persist longer. He noted that tariffs are pushing up inflation and slightly raised his assessment of labor market risks while slightly lowering inflation risks. Mousallem added that current economic conditions and data do not support a 50 basis point rate cut.
U.S. Treasury Secretary Scott Besant said in a Bloomberg Television interview on Wednesday that the Federal Reserve should cut interest rates by 150-175 basis points. This came after he urged the Fed to cut rates by 50 basis points in September in a Fox Business Channel interview on Tuesday night, citing cooling inflation and downward revisions to jobs data.
Federal Reserve official Goolsbee said on Wednesday that policy will be determined "in real time" at the upcoming Fed meeting. He described tariffs as a "stagflationary shock" and expressed concern about one-off price effects. Goolsbee noted that the services inflation data in the latest CPI report was "awful," while describing the labor market as "quite solid." He added that slowing job growth likely reflects declining population growth rather than weakening demand, and stressed that a few consecutive months of favorable inflation data would be needed before a rate cut would be comfortable.
Federal Reserve official Raphael Bostic said on Wednesday that given the strong performance of the labor market, the central bank has "ample leeway" to wait and see when to adjust policy. He reiterated that he still believes it is appropriate to cut interest rates in 2025.
Initial jobless claims for the week ending August 10th are expected to be 228,000, compared to 226,000 in the previous week. Continuing claims are expected to be 1.96 million, compared to 1.974 million in the previous week. The PPI is expected to rise 0.2% month-over-month and 2.5% year-over-year in July. The core PPI is expected to rise 0.2% month-over-month and 2.9% year-over-year.
Technical analysis: Spot gold is in the 3330-3370 range, traders await US data
(Spot gold 4-hour chart, source: Yihuitong)
From the 4-hour chart, the late 21-period moving average crossed below the 55-period moving average. Spot gold is currently suppressed by the resistance of the 200-period moving average near $3347.52. The resistance of the 20-period and 100-day moving averages is near the 3350 mark, and the 55-period moving average of $3364 is the short-term resistance level, supported by the 3330 mark below.
Gold prices continue to fluctuate within the familiar range of $3,330-3,370, with the repeated lower shadows of recent candlestick patterns suggesting strong buying interest on dips. However, bulls have yet to effectively break through the upper edge of the range, and further downside risks to gold prices remain a concern.
A decisive break above the $3,370 resistance level could open the way for a test of the $3,400 psychological barrier. On the other hand, continued resistance at the 20-period moving average at $3,350 could trigger a correction towards the $3,330 support level. A break below this level would open the way for a test of the $3,300 psychological barrier.
At 13:40 Beijing time, spot gold was trading at $3345.18 per ounce.
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