Gold sticks to intraday gains, modest USD strength caps the upside ahead of US PPI

• Gold price gains positive traction for the second straight day amid bets for additional Fed rate cuts. 
• A softer risk tone further benefits the safe-haven precious metal and contributes to the positive move.
• Fading hopes for a more aggressive easing by the Fed underpin the USD and cap the XAU/USD.

Gold price (XAU/USD) retreats a bit from a three-day peak and trades around the $2,640 area during the early European session on Friday, still up over 0.40% for the day. A surge in the US weekly jobless claims pointed to signs of weakness in the labor market and should allow the Federal Reserve (Fed) to continue cutting interest rates. This, in turn, triggers a modest decline in the US Treasury bond yields, which, along with a softer risk tone, assists the non-yielding yellow metal to gain positive traction for the second straight day. 

Meanwhile, investors fully priced out the possibility of another oversized interest rate cut by the Fed in November following the release of stronger-than-expected US consumer inflation figures on Thursday. This, in turn, helps the US Dollar (USD) to stall the previous day’s corrective pullback from its highest level since mid-August and acts as a headwind for the Gold price. Traders now look to the US Producer Price Index (PPI), the Preliminary Michigan Consumer Sentiment Index and Inflation Expectations, and Fedspeak for short-term impetus. 

Daily Digest Market Movers: Gold price bulls retain intraday control ahead of the US PPI report

• The US Labor Department reported on Thursday that the headline Consumer Price Index rose 2.4% in the 12 months through September, while the core gauge, which excludes food and energy prices, climbed 3.3%. 
• The stronger US consumer inflation data fueled speculations about a slower pace of rate cuts by the Federal Reserve and lifted the US Dollar to a nearly two-month top, though the initial reaction faded rather quickly. 
• The number of Americans seeking unemployment benefits increased by 33,000, to a seasonally adjusted 258,000 in the week ended October 5 vs. 230,000 expected and pointed to signs of weakness in the US labor market. 
• Given that the Fed has shifted its focus on obtaining maximum sustainable employment, the mixed data suggests that the US central bank will continue cutting interest rates and continue to benefit the non-yielding Gold price. 
• Meanwhile, the yield on the benchmark 10-year US government bond manages to hold above the 4% threshold, which acts as a tailwind for the Greenback and might keep a lid on any further gains for the XAU/USD. 
• China’s finance ministry will hold a briefing on Saturday and release more details of fiscal stimulus measures, underpinning the risk sentiment and contributing to capping any meaningful upside for the commodity.
• Traders now look forward to the release of the US Producer Price Index (PPI) report, which will drive the USD demand and produce short-term opportunities around the precious metal heading into the weekend.

Technical Outlook: Gold price seems poised to appreciate furthre towards the 2,670-2,672 resistance 

From a technical perspective, the overnight goodish rebound from the vicinity of the $2,600 mark and the subsequent move back above the $2,630 static support breakpoint-turned-resistance favors bullish traders. Moreover, oscillators on the daily chart hold in positive territory and suggest that the path of least resistance for the Gold price is to the upside. Hence, some follow-through strength towards the $2,657-2,658 horizontal barrier, en route to the $2,670-$2,672 supply zone, looks like a distinct possibility. The momentum could eventually lift the XAU/USD to an all-time high, around the $2,685-2,686 region touched in September. This is closely followed by the $2,700 mark, which if cleared will set the stage for an extension of a well-established multi-month-old uptrend.

On the flip side, the Asian session low, around the $2,630-2,628 region, now seems to protect the immediate downside, below which the Gold price could challenge the $2,600 pivotal support. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pace the way for deeper losses. The XAU/USD might then extend the corrective decline towards the next relevant support near the $2,560 zone en route to the $2,535-2,530 region before eventually dropping to the $2,500 psychological mark.