Gold bulls blink as hot US PPI, $100 Oil send yields flying

Gold price retraces by about 0.90% on Thursday as traders price in a hawkish Federal Reserve (Fed) following the release of the US Producer Price Index (PPI) for August. The risk-off sentiment in the market is supported by a jump in energy prices with Brent and WTI crude benchmarks rising above the $100 threshold. The XAU/USD trades at $4,360 at the time of writing.

The US PPI came in at 0.4% MoM, matching forecasts, but its annual rate reached 5.4%, slightly above the expected 5.3%. Excluding volatile items, the data were aligned with economists' predictions, though the monthly core increase was 0.2%, lower than the estimated 0.3%, and the yearly core figure was 4.6% as expected.

At the same time, the US Department of Labour revealed that Initial Jobless Claims for the week ending September 5 rose by 205K above forecasts of 205K but below the previous week's print.

The PPI reading, alongside surging energy prices, increased the chances that the Fed will raise interest rates by 25 basis points at next weeks meeting. Money markets see a nearly 70% chance for an increase, based on the CME FedWatch Tool.

West Texas Intermediate (WTI), the US Crude benchmark, cleared the $100 per barrel barrier for the first time since mid-May. In addition, US Treasury yields are rising with the 10-year benchmark note soaring nearly 7 basis points at 4.93%.

The US Dollar Index (DXY), which tracks the bucks performance against six currencies, is up 0.2% to 98.99, exerting pressure on the yellow metal that is denominated in US Dollars.

Traders' focus shifts to Friday‘s Consumer Price Index (CPI) release. August’s CPI is foreseen rising from 0.1% to 0.4% MoM, and for the last 12 months is expected to remain unchanged at 3.4%. Core CPI is estimated to hold at 0.2% Mo and to dip from 2.5% to 2.4% YoY.

The US docket will also feature the University of Michigan's preliminary Consumer Sentiment reading for September.

Gold price consolidated above the 100-day Simple Moving Average (SMA) of $4,339, keeping the yellow metal from testing the $4,282 September 2 low.

The Relative Strength Index (RSI) signals that further sideways trading lies ahead as the 200-day SMA is at $4,538, capping Bullions advance.

For a bearish continuation, XAU/USD must drop below the 100-day SMA and also clear the $4,300 mark. Below the next stop is $4,282, followed by the 50-day SMA at $4,266, and by $4,200.

On the upside, if Gold rises past $4,400, a move to the $4,450 psychological level is likely to. If hurdled, the $4,500 would be up for grabs, ahead of the 200-day SMA.