Gold and silver prices declined in Thursday’s U.S. trading session, ending their recent rally as weaker-than-expected wholesale inflation data pushed Treasury yields lower and reduced expectations for a Federal Reserve rate hike. At the same time, falling oil prices also weakened short-term demand for precious metals as an inflation hedge.

At the time of writing, spot gold was trading near $4,349.80 per ounce, down 1.31%, while spot silver stood at $64.290 per ounce, down 1.40%.

Weaker PPI Reduces Expectations for a Fed Rate Hike

The Producer Price Index for final demand was unchanged in July, below market expectations for a 0.2% increase.

Initial jobless claims rose by 9,000 to 209,000, while continuing claims declined to 1.777 million.

Following the data release, the probability of a Federal Reserve rate hike in September fell from 40.6% to 34.6%. The U.S. 10-year Treasury yield also declined from 4.686% to 4.648%.

Lower yields are generally supportive for gold because they reduce the opportunity cost of holding non-yielding assets. However, softer inflation data also reduces the short-term need to hold precious metals as an inflation hedge.

Falling Oil Prices Weigh on Safe-Haven Demand

Tensions surrounding the Strait of Hormuz remain an important geopolitical factor for global energy supply, but their impact on markets eased during the session.

Brent crude fell 2.1% to $87.07 per barrel, while WTI traded near $81.50 per barrel.

Lower oil prices help ease inflationary pressure, which in turn reduced part of the defensive demand for gold. However, shipping restrictions and ongoing tensions between the U.S. and Iran continue to provide some underlying support for safe-haven assets.

U.S. Equities Continue to Rise

North American equity markets closed higher:

• S&P 500 rose 0.7% to 7,798.99

• Nasdaq Composite gained 0.8% to 26,803.03

• Dow Jones Industrial Average advanced 0.1% to 53,839.99

• Russell 2000 increased 0.2% to 3,052.85

Stronger risk appetite in equities also contributed to softer demand for gold during the session.

Gold Technical Outlook

From a technical perspective, gold is approaching an important short-term support zone.

If gold breaks above $4,448, the bullish move could extend toward the $4,575–$4,666 area.

On the downside, a break below $4,332 could increase selling pressure and expose $4,262, followed by $4,205.

Silver Also Comes Under Pressure

For silver, the nearest resistance is located at $66.53, followed by $71.18 and $72.08.

On the downside, support levels are seen at $64.47, followed by $63.28 and $61.94.

Conclusion

Gold is currently being driven by conflicting forces. Lower Treasury yields and weaker expectations for a Fed rate hike are supportive, while falling oil prices, stronger equity markets, and weaker inflation-hedging demand are creating downward pressure.

In the short term, the $4,332 support level and $4,448 resistance level will be key technical zones to watch for the next directional move in gold.

This content is for informational and market-analysis purposes only and does not constitute investment advice.

Source: Kitco