A1 Trading Company

May 11, 2023

Why Gold Tumbled on PPI

Frank Cabibi

Gold prices fell on Thursday morning after Producer Price Index came out lower than expected suggesting a decline in inflation. The initial reaction to this news is extremely negative as many factors start playing in to market activity including SVB House hearing, debt ceiling, and other events happening today.

EdgeFinder Analysis

CHF/JPY falls with a rise in risk-off sentiment. Today's PPI numbers seemed to affect the Swiss and Japan markets as well. The pair's score is still a strong buy around +6 with almost all indicators pointing toward CHF strength. The two exceptions being retail sentiment and GDP growth which is scored at neutral.

Price is down over half a percent to start off the NY session, nearing the April lows around 149.077. This could be partially due to the overall rebound in yen which has been beaten down for some time. Because both currencies are considered risk off, traders might be looking for the more stable pick. In this case, EdgeFinder likes CHF more.

Gold tumbled on the news of lower PPI which is a helpful measure of inflation as well as demand for products such as the metal. The sell off came abruptly in the initial reaction, but the metal has paired some losses since. The USD saw an unexpected spike after a lower-than-expected inflation number. Core CPI still remained unchanged which is another concern for interest rate decisions.

One thing gold is good at is its hedge against inflation, but demand must be growing as well. Price hovers around the $2019. If a bottom was established on the current 4H candle, we may see a test to the $2030s again. However, if demand struggles still, we can expect a test at $2000 again.

JP225 remains hot on the EdgeFinder's radar which is reading a +6 strong buy. The index is relatively flat today as we near the middle of the NY session. Trend readings still point upwards despite yesterday's losses. Mixed earnings are keeping price at bay for the time being as stocks near August 2022 highs.

Unusual sentiment also makes it hard to pick sides on the index. COT and retail agree which is not very common. Both are largely short, although institutions are clearly increasing their long positions in the stock market.

Retail Spotlight

The crowd likes oil with a mixed outlook on gold. USD pairs are mixed per usual, but the strongest biases look to be on the Japanese and German stock markets. The problem as we discussed earlier is that institutional activity also agrees with retail sentiment.

Smart Money Tracker

Here's the full view of the Smart Money Tracker with its new features at the bottom. Gold is pulled up on the two new charts. Week to week data suggests a flatline on gold longs with a slight increase in USD longs. The currency pair bias chart shows a declining number of net long biases over the past three weeks. Although gold is the most bought asset on the tracker, a declining net bullish bias is something to consider.

Fundamental Spotlight

The US currently has the advantage between Europe and UK. BOE just announced a rate hike of 25 bp in the hopes of getting back under the double digits that has been pressuring UK's economy. This mild increase in the bank rate is meant to prevent a recession in the UK which seems to be working in the investors' eyes.

A1 Edgefinder

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

Dollar Remains Strong

Indices recover from Friday's lows as the dollar index hovers at break even. The mounting tensions in Israel-Iran escalated market worries, but financial earnings have kicked off to a good start. EdgeFinder Analysis Retail Sales came in higher than expected which is a good sign for the economy. It's also strong for the USD as […]

Read More
Hotter CPI Shakes Markets

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut. EdgeFinder Analysis EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher […]

Read More
Key Inflation Data Weighs on Investor Sentiment

Wednesday's inflation report in the US will be very pivotal in how USD-related assets will react for the next month. Higher CPI has investors worried of the Fed who still looks to cut rates at some point this year, but the inflationary trend could determine when these rate cuts come. EdgeFinder Analysis We have been […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram