Gold Trading Reminder: Oil Prices Break 100, USD Under Pressure, Gold Price Rebounds 1%! PPI Data Coming Tonight

FX168 Finance, September 10—— On Wednesday, gold prices rose by more than 1%, with spot gold quoting at $4,401.73, mainly fueled by a weaker US dollar and the escalation of Middle East conflicts that pushed oil prices above $100 per barrel. Investors are waiting for this week's US PPI and CPI data to gauge the approximately 60% probability that the Federal Reserve will raise rates next week. Geopolitical risk aversion support and potential monetary policy tightening are forming a tug-of-war, and the short-term direction of gold will depend on inflation data and the evolution of the situation.

On Wednesday (September 9), the global gold market saw a notable rebound. Spot gold surged to an intraday high of $4,433.95 per ounce before closing at $4,401.73, a single-day increase of over 1%. December gold futures settled at $4,458.80, rising by approximately 0.5%. This occurred amid a confluence of a persistently pressured US dollar, rapidly escalating Middle East tensions driving up oil prices, and the market's intense focus on key inflation data this week. Investors are enjoying the short-term benefits from risk aversion and a weaker dollar but remain anxious about the upcoming Producer Price Index and Consumer Price Index releases—data that will directly affect the likelihood of the Federal Reserve raising rates at next week's policy meeting, with market expectations currently up to about 60%. Gold stands at a sensitive crossroads: geopolitical and energy shocks provide upside momentum, but potential monetary tightening acts as a downside risk. Today's session will first face the test of US PPI data. In early Asian trading on Thursday (September 10), spot gold moved slightly lower, currently trading near $4,395 per ounce.

Weaker Dollar and Geopolitical Premium Jointly Support Gold Prices

The most direct support for this gold rally comes from dollar weakness. The US Dollar Index hovers near a two-week low, which makes dollar-priced gold more attractive to investors holding other currencies. David Meger, Director of Metals Trading at High Ridge Futures, pointed out that the dollar's recent mild pressure has created a positive environment for the gold market. At the same time, the sudden escalation of conflict in the Middle East has further enhanced gold's safe-haven appeal.

The US and Iran have engaged in the largest maritime skirmishes in six months near the Strait of Hormuz. The Iranian Revolutionary Guard claimed to have attacked 10 vessels, including two US ships, while the US military announced it had destroyed five Iranian oil tankers and released footage of burning, sinking ships. The conflict has also spread to a US military base in Jordan, with Iran firing ballistic missiles, most of which were intercepted by Jordan. Simultaneously, fighting between Saudi Arabia and Yemen's Houthi forces has intensified, forming a second front line.

These events have directly impacted crucial channels of global energy supply. Before the conflict, about one-fifth of the world's oil moved through the Strait of Hormuz, but recent fighting has seen daily crude shipments fall from 8–9 million barrels to as low as 2 million barrels. As a result, Brent crude broke through $100 per barrel for the first time since July 24, settling at $101.21 with a jump of over 3%.

Rising oil prices have fueled inflation expectations and disrupted supply chains, in turn affecting bond markets and the dollar. Rhona O'Connell, Head of Market Analysis at StoneX, observed that the current surge in oil prices, driven by transportation and supply chain disruptions, is driving bond yields higher, given that current monetary policy is more focused on containing inflation than in the past. The US 10-year Treasury yield briefly touched its highest since November 2023 before pulling back.

Kevin Ford, FX and Macro Strategist at Convera, pointed out that US policy premium is capping the dollar's rise, while the yen has temporarily strengthened with the support of the US Treasury, creating a disconnect between rate expectations and oil prices. Collectively, these factors have created a relatively favorable short-term environment for gold: dollar weakness lowers holding costs and geopolitical uncertainty heightens safe-haven demand.

Inflation Data and Rate Hike Expectations as Potential Counterbalances

However, the market is not unanimously bullish. What investors are really watching are the incoming key US inflation data—Thursday's Producer Price Index (PPI) and Friday's Consumer Price Index (CPI). These numbers will offer critical clues on whether the Federal Reserve will raise rates at its policy meeting September 15–16. Last Friday's August jobs data far exceeded expectations, reigniting rate hike bets, with federal funds futures now showing about a 60% chance of a hike next week.

Oil's break above $100 has further heightened these concerns. Rising fuel costs could feed through into consumer prices, rendering inflation—already above the Fed's 2% target—even more persistent. Lawrence Gillum, Chief Fixed Income Strategist at LPL Financial, stated that the inflation picture is becoming more stubborn, which could prompt the Fed to hike rates. Meanwhile, the US Treasury announced on Thursday it would expand the size of its long-term bond buybacks to up to $6 billion, three times the previous scale. This news helped the dollar pare some losses and partly eased upward pressure on yields after the announcement. The 10-year bond was successfully auctioned at a yield of 4.834%, with demand the strongest since 2019, sending yields off intraday highs.

This complex tug-of-war is keeping gold's price action resilient. On one hand, if inflation data remains strong, the market may further price in rate hikes, weighing on non-yielding gold; on the other, if the data are mild or Middle East turmoil triggers more widespread supply chain disruptions and safe-haven flows, gold could extend its rally. OCBC strategists also emphasized that the latest escalation in the Middle East keeps the impact of higher energy prices on Fed policy firmly in focus.

Supply and Demand Concerns Present Both Risks and Opportunities

From a longer-term perspective, gold’s fundamentals remain supported by multiple factors. Geopolitical risk premia are unlikely to fade quickly, especially as Iran threatens to declare a broader maritime exclusion zone extending towards Pakistan’s Chabahar port, and the surge in refined product prices has even surpassed that of crude—US retail diesel has hit a record high, exceeding $5.94 per gallon. These developments continue to push up global inflation expectations, indirectly benefiting gold.

Meanwhile, the market is also watching trends in other precious metals. The World Platinum Investment Council noted that this year, the platinum market will see its first annual supply surplus since 2022, contrasting with gold and highlighting different metals' sensitivities to macro conditions. For gold, the current backdrop remains demand-driven: central bank buying, investor safe-haven allocations, and diminished allure of dollar assets are all providing a floor beneath prices.

Outlook

In summary, Wednesday’s rise in gold was the result of both a weaker dollar and Middle East conflict, rather than a single driver. Oil’s rally past $100 has contributed to both inflation pressures and heightened safe-haven demand; this week’s inflation data will be the short-term touchstone. If the data strengthen rate hike expectations, gold could face a pullback; if conflict escalates further or inflation is temporarily tamed, gold may push to higher ranges. Overall, gold is consolidating between the 100-day moving average at $4,342 and the 200-day at $4,537, with close attention needed on upcoming data before Friday and any fresh developments in the Middle East. In the short term, also watch the resistance area near the 21-day moving average at $4,462.


(Spot gold daily chart, source: FXBest)

GMT+8 07:48, spot gold last at $4,394.18 per ounce.