• Gold continues to gain after the Michigan Consumer Sentiment Index revealed a decline in sentiment on Friday.
• Gold shrugged off higher inflation data early in the day as frail U.S. employment data on Thursday kept alive hopes for further Fed easing.
• Technically, XAU/USD returns to range-bound mode before extending its leg back higher.

Gold (XAU/USD) continues to rally, reaching $2,650 on Friday, after the release of the Michigan Consumer Sentiment Flash Index, which showed deterioration in sentiment in October.

The Michigan Consumer Confidence Index fell to 68.9 in October from 70.1 the previous month and was below estimates of 70.8. according to data from the University of Michigan.

The release came after data showed U.S. factory prices rose in September from a year ago but were unchanged from the previous month. The mixed data appeared to have little impact on gold prices, which remained steady at $2,640 following the release.

The headline PPI in the US increased by 1.8% y/y in September, which was higher than the 1.7% recorded in August and exceeded estimates of 1.6%. data from – the US Bureau of Labor Statistics (BLS) showed on Friday.

However, these increases were not reflected in the monthly data, which showed headline PPI increased by 0.0% compared to 0.2% in August and below the forecast of 0.1%.

The PPI ex Food and Energy index increased by 2.8% y/y in September, which was higher than 2.4% in August and exceeded expectations of 2.7%.

For core PPI, monthly data showed slower growth of 0.2% in September compared to 0.3% in August, which was in line with expectations.

PPI data is sometimes treated as a precursor to consumer prices because higher input prices are usually passed on to consumers in the form of higher store prices.

Gold gains after US employment data

Gold rebounded slightly above the key psychological level of $2,600 on Thursday after the release of official U.S. jobless claims data showed a surprising augment in the number of people applying for unemployment benefits. US Treasury yields fell following this release, the US dollar (USD) weakened slightly and gold rose.

U.S. jobless claims rose by 258,000 in the week ending Oct. 4, up from 225,000 in the week ended October 4. last week and expectations at 230,000, according to data from the US Bureau of Labor Statistics (BLS). According to Bloomberg News, the augment in initial claims was well above average, although it may have been caused by an exodus from Florida before Hurricane Milton hit.

Continuing claims for the week ending September 27 rose to 1.861 million, up from the previous week’s downwardly revised 1.819 million and rounding above the estimate of 1.830 million.

Overall, the data showed weakness creeping into the labor market, which will likely keep the Fed on track to cut interest rates (to spur borrowing and job creation) at its November policy meeting. In August, Fed Chair Jerome Powell signaled that he was shifting his focus from inflation to another Fed mandate: “full employment.”

While the market probability of the Fed cutting the federal funds rate by 50 basis points (bps) (0.50%) remained at zero after publication, the odds of a smaller cut of 25 basis points (0.25%) increased to 89% from 85% before job data, according to CME’s Fedwatch tool. The likelihood of the Fed leaving key interest rates unchanged in November fell to 11% from 15%. These probabilities have since returned to 85% for 25 basis points and 15% for no change.

Higher than expected inflation data as measured by the Consumer Price Index (CPI) for September, published at the same time as the unemployment numbers, did not act as a counterweight. Headline CPI increased by 2.4% year-on-year (y/y) from 2.3% previously, and core CPI increased by 3.3% y/y from 3.2% previously. Higher inflation would normally be expected to augment the Fed’s stance on keeping interest rates unchanged to continue fighting stubbornly high inflation, but that didn’t happen on Thursday. This was likely due to the Fed’s fresh priority on jobs.

Gold has gained popularity recently due to speeches from Fed policymakers. A long list of officials spoke on the outlook for monetary policy on Wednesday, and all were rated neutral or dovish according to FXStreet FedTracker, a fresh artificial intelligence-powered tool that rates the tone of Fed officials’ speeches as dovish. -hawk scale from 0 to 10.

Gold may also benefit from attracting sheltered flows amid heightened geopolitical tensions. Israel has stepped up its bombing of Hezbollah targets in Lebanon, causing significant collateral damage, and investors remain uncertain about the scale of Israel’s almost certain retaliation against Iran.

Technical Analysis: Gold returns to known range

Gold is reversing its short-term downtrend and climbing back to the familiar range above $2,625 after hitting a psychological low at $2,600.

XAU/USD 4-hour chart

The short-term trend has likely reverted back to a sideways trend, and given the technical analysis principle that “the trend is your friend,” the near-term odds point to a continuation. This will likely cause gold to continue rising towards the aged range high of $2,670. A break above $2,653 (October 8 high) would provide more confirmation that this leg is evolving. Gold can then lower the leg back to the bottom of the range as the price continues to oscillate.

Medium to long-term gold trends remain bullish, however, and if one of these long-term cycles resumes, it could theoretically push the gold price to even higher highs.