Harmovest Capital | Hotter Inflation, Weaker Gold?

Key Highlights

• U.S. PPI rose to its highest level since 2022.

• Markets expect the Federal Reserve to keep rates unchanged next week.

• Progress in U.S.-Iran negotiations has eased safe-haven demand.

• The U.S. dollar remains supported while gold faces selling pressure.

Market ReviewU.S. Producer Inflation Accelerates, Raising Concerns Over Persistent Price Pressures

U.S. producer prices increased sharply in May, signaling that inflationary pressures remain elevated across the economy. The Producer Price Index (PPI) rose 1.1% month-over-month, pushing the annual rate to 6.5%, its highest level since November 2022.

The stronger-than-expected reading suggests that rising business costs continue to work their way through the supply chain. While higher producer prices do not always translate directly into consumer inflation, they often serve as an early indicator of future price increases.

With inflation remaining stubbornly high and recent employment data exceeding expectations, markets have begun reassessing the possibility of tighter monetary policy in the months ahead, even as the Fed is widely expected to leave interest rates unchanged at its upcoming meeting.

Affected Markets: USD, Gold, S&P 500

Market Outlook

Inflation remains a key concern for investors after the latest PPI data reinforced expectations that price pressures are not easing as quickly as anticipated. This could limit the Federal Reserve's flexibility to consider rate cuts and may keep the U.S. dollar supported in the near term.

At the same time, easing geopolitical tensions have weakened safe-haven demand, creating additional headwinds for gold. As markets shift their focus back toward economic data and monetary policy, volatility is likely to remain elevated.

Market Sentiment Analysis

Fear & Greed Index

The Fear & Greed Index declined from 36 to 30, indicating that investors remain cautious despite improving geopolitical conditions.

As concerns surrounding the Middle East ease, capital flows have gradually shifted away from defensive assets and back toward risk-oriented investments. However, elevated inflation and uncertainty over future Fed policy continue to limit overall market optimism.

Technical Analysis – XAUUSD

Gold Remains Under Pressure Below Key Moving Averages

Gold continues to trade with a bearish bias after breaking below both the EMA89 and EMA144 levels. The recent price structure suggests sellers remain in control, with lower highs and lower lows continuing to develop.

As long as price remains below these key technical levels, downside risks are likely to persist.

Trading Bias: Sell on Rally

Focus on potential short opportunities during corrective rebounds while maintaining proper risk management.