Gold reversed from the yesterday highs and is trading on sideline trend today amid the economic conditions in U.S. Yesterday Gold reached the peak level since the five months and it’s the best week for Gold. Despite widespread speculation that the U.S. labor market has healed enough for the Fed to begin reducing its monthly bond purchases within the next month, policymakers are sharply divided on inflation. US treasury yields lifted the metal’s appeal despite a looming Federal Reserve taper.

The yellow metal hit a daily high yesterday after the U.S. Producer Price Index (PPI) rose 8.6 percent and 8.7 percent in September. PPI was seen by many investors as a leading indicator. As PPI is a measure of total inflation. This marks the biggest year-on-year improvement since November 2010. The PPI fell to 0.5% in September from 0.7% in August. Core PPI, which removes volatile food and energy prices, rose 0.2% month-on-month after a 0.6% improvement in August. Also the annual core PPI is up 6.8% and the expected 7.1%.

For the first time in 19 months, the number of Americans filing new claims for unemployment benefits fell below 300,000 last week. The labor sector rose 0.5% in September for the final demand of its producer price index, the smallest gain in nine months. Recent U.S. PPI figures show that September inflation rose to 5.4% a year later, matching the largest annual price gain since 2008. Inflation worries rise again in light of growing energy crisis Central bank officials are beginning to debate whether price pressures are as temporary as previously thought.

The minutes of the central bank’s September meeting this week confirmed that the start of this year is certain, although policymakers are sharply divided on inflation and several participants are tensioned were likely to justify keeping the rate at or near its lower bound over the next couple of years. On the contrary, many participants raised the possibility of starting to increase the target limit by the end of next year because they expected the effects of the labor market and inflation on the Federal Reserve’s guidance on the rate to be achieved at that time; Some of these participants found that by 2022 inflation will be high with rising risks.

Market watchers are now awaiting for US retail sales monthly report today and FOMC Member Williams Speech on evening could drive the pair.

XAU/USD 4 Hour Chart:

Support: 1787.7 (S1), 1780.2 (S2), 1773.7 (S3).

Resistance: 1801.6 (R1), 1808.0 (R2), 1815.5 (R3).

Amidst this above catalysts the yellow metal is on sideline trend against greenback. We expect a Mid-Trend for XAU/USD.