- Gold gains 1% on Friday and the week will end with an boost of 0.20%.
- US PPI data was slightly above expectations, suggesting inflation has slowed but remains above target, while UoM Consumer Sentiment highlights concerns about the rising cost of living.
- Despite higher US Treasury yields, with the 10-year bond rising to 4.081%, bullion prices remain supported as the Fed is expected to cut interest rates later this year.
Gold rose more than 1% on Friday and the yellow metal will end the week with a modest 0.20% gain after the release of inflation data on Friday and Thursday’s Consumer Price Index (CPI) report circumscribed the dollar’s gain. At the time of writing, the XAU/USD rate is USD 2,658.
Mixed economic data supported prices of the yellow metal. The US Bureau of Labor Statistics (BLS) revealed that prices paid by producers were close to consensus, indicating that inflation is trending down but above expectations. At the same time, University of Michigan (UoM) consumer sentiment data for October showed a deterioration among Americans due to higher costs of living.
Although the data had no impact on the US dollar, which remained sturdy, metal prices rose slightly. This is despite the yield on U.S. Treasuries, particularly the 10-year T-bond, rising by one and a half basis points to 4.081%.
Chicago Fed President Austan Goolsbee contacted Bloomberg praising progress on inflation and the labor market. He added that despite sturdy September employment reports, there are no signs of overheating.
“PPIs were friendly to precious metals bulls and suggest the Fed remains on track for two quarter-point rate cuts this year,” noted Jim Wyckoff, an analyst at Kitco.
The U.S. economic schedule will remain tight next week, with Fed officials and New York’s Empire State Manufacturing Index continuing to make headlines. In the second part of the week, data on retail sales, the number of unemployed people and the housing market may dictate the path of the Fed’s monetary policy.
Daily summary of market changes: The price of gold is rising despite high yields in the US and a sturdy USD
- The price of gold has finally broken through the $2,650 barrier, but it needs to achieve a daily close above that level to start trading in the $2,650-$2,685 range.
- As a result, the zloty is growing, as evidenced by the US dollar index (DXY), which is gaining 0.02% to 102.90.
- September’s US producer price index (PPI) rose 1.8% y/y, more than the expected 1.6% but less than August’s 1.9%. Core PPI increased by 2.8% y/y, exceeding forecasts and up from the September estimate of 2.7% and August’s estimate of 2.6%.
- On a monthly basis, PPI remained at 0%, lower than the estimated 0.1% and lower than August’s 0.2%. As expected, core PPI fell to 0.2%, down from 0.3% in the previous month.
- The University of Michigan (UoM) consumer sentiment index deteriorated from 70.1 to 68.9, below expectations of 70.8. Annual inflation expectations were revised upwards from 2.7% to 2.9%.
- The combination of a slightly higher Consumer Price Index (CPI) and a frail U.S. jobs report on Friday could lead to additional interest rate cuts by the Federal Reserve.
- Data from the Chicago Board of Trade, based on the December federal funds rate futures contract, shows investors estimating 49 basis points (bps) of Fed easing in delayed 2024.
XAU/USD Technical Analysis: Gold price uptrend resumes but remains below $2,650
Gold’s uptrend has returned, with the yellow metal registering bullish daily candles, suggesting buyers may break a year-to-date high in the near future. According to the Relative Strength Index (RSI), momentum favors buyers with higher readings in bullish territory.
With this in mind, the first resistance for XAU/USD will be the October 4 high at $2,670. Once crossed, the next stop will be the year-to-date high of $2,685, before the $2,700 level.
Conversely, if XAU/USD falls below $2,650, it could result in a decline towards $2,600. A violation of the latter will result in a 50-day straightforward moving average (SMA) of $2,545.
