Gold prices rebound violently by nearly 2%, as weak US economic data boosts expectations of interest rate cuts

Spot gold experienced a strong rebound on Thursday, with a daily increase of nearly 2% driven by rising expectations of Fed interest rate cuts and a rebound in risk aversion.

Data shows that the gold price rose by $62.48 on the same day, with an increase of 1.97%, closing at $3239.61 per ounce. After hitting a low point in over a month during trading, it quickly rose, indicating the market's sensitive response to changes in risk sentiment.

FXStreet analyst Christian Borjon Valencia pointed out that the rebound in gold prices is mainly influenced by the latest economic data released by the United States. The Producer Price Index (PPI) unexpectedly recorded negative growth in April, while retail sales growth slowed significantly, providing more policy space for the Federal Reserve to cut interest rates this year and exacerbating market concerns about the outlook for the US dollar.

Economic data boosts expectations of interest rate cuts, US dollar weakens, bullish on gold

According to data from the US Department of Labor, PPI decreased by 0.5% month on month in April, far below the market's previously expected growth of 0.2%; The core PPI also fell by 0.4%, while the expected growth is 0.3%. At the same time, retail sales in April only increased by 0.1% month on month, in sharp contrast to the 1.7% increase in March, further highlighting consumer fatigue.

The weak macroeconomic performance not only lowers the US dollar index, making gold more attractive to investors holding other currencies, but also rapidly raises market expectations for the Federal Reserve's policy shift. The latest data shows that the market has bet on a rate cut of 53 basis points by 2025, higher than the previous expectation of 48.5 basis points.

Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, stated that data has opened up more policy space for the Federal Reserve, and market expectations have significantly turned dovish, which precisely supports gold.

Geopolitical risks remain unresolved, and the demand for safe haven has reappeared

In addition to economic factors, geopolitical uncertainty also supports gold prices. During the Russia Ukraine peace talks held in Türkiye, Russian President Putin did not attend in person, which caused the market to question the progress of the negotiations. Analysts point out that Putin's dispatch of secondary representatives and refusal of Ukraine's request to personally meet with President Zelensky have once again cast a shadow over the prospects for peace.

Grant pointed out that Putin's absence has led the market to reassess geopolitical risks, prompting some investors to replenish their gold positions to hedge against potential instability.

The easing of tariffs between China and the United States will not change the global tense atmosphere

Despite the announcement of a 90 day tariff truce by China and the United States, and a brief rebound in overall market risk appetite, analysts believe that uncertainty in the global trade landscape still exists, and investor sentiment remains conservative.

Valencia stated that as gold prices, which had previously declined due to the easing of trade between China and the United States, began to rebound after signals of deteriorating economic fundamentals emerged. After falling from a high of $3326 to $3207, the gold price is currently experiencing a technical rebound.

Technical aspect: Can the bullish trend continue beyond the 3200 mark?

From a technical perspective, Valencia believes that the successful recovery of gold prices from the $3200 mark is a positive signal for bulls. If it breaks through the May 14th high of $3257 in the future, it is expected to further test the integer figure of $3300 and recover some of the week's losses.

But analysts also warn that the trend of the Relative Strength Index (RSI) is still weak, indicating that the current rebound may only be a technical correction to the previous decline.

If the gold price fails to maintain above $3200 and closes lower again, it will face the risk of a pullback. The key supports below are located at the 50 day simple moving average (SMA) of $3155 per ounce and the psychological barrier of $3100.