On September 11, gold weakened overnight following the PPI release, with prices sliding during the early morning hours to approach the 4300 level. The PPI data has lifted the probability of a rate hike in October or November to 70%, up from the previous 50%. Should tonight's CPI figures continue to show strength, the current momentum suggests gold prices could decline further.
From a daily chart perspective, gold experienced a sharp drop yesterday, fully erasing the technical rebound from the prior session. This shift has technically reversed the market back into a bearish trend. The moving averages have crossed downward, and the daily candlesticks display a "bearish engulfing" pattern—signals that point to additional downside potential ahead.
On the fundamental side, the European Central Bank's rate hike overnight, combined with the PPI data, has reinforced expectations of further tightening by the U.S. Federal Reserve. Even if the Fed opts not to raise rates next week, it is highly likely to adopt a hawkish tone, suggesting that gold remains vulnerable to weakening in the medium term. All eyes are now on tonight's CPI report. Comments from a Fed governor last week have elevated the significance of this data release, as it is viewed as a critical gauge for potential rate moves. Tonight's session is unlikely to be routine; if the data bolsters rate hike expectations, gold is poised to release downward momentum ahead of next week's rate decision.
On the hourly chart, a sharp selloff followed the ECB rate hike and PPI release, with prices falling to the 4325 area before bouncing. However, the rebound met resistance near 4375, as expected, before prices turned lower again. This price action confirms that the market is pricing in a stronger likelihood of Fed tightening, validating the bearish outlook for gold. During the daytime session, any rebound is likely to be limited, with near-term resistance seen around 4360 and key overhead pressure at the 4375 overnight high.
Given the multitude of factors driving expectations for higher U.S. interest rates, the strategy for today leans toward selling on rallies at higher levels. For those willing to take on risk, positions can be initiated ahead of the CPI release, while more cautious traders may prefer to wait for the data before adjusting their approach.
Trading recommendations for gold: Consider initiating light short positions near 4350-55, with scope to add further shorts if prices test the 4370-75 zone. Overnight short positions established at these levels should be retained. All short positions should initially carry a 10-point stop loss, with targets set at the 4320-4300 region for partial profit-taking and stop adjustments to breakeven. Remaining positions can aim for a test of 4250 or lower, should tonight's data trigger a significant drop. Long positions are not recommended at this stage.
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