US information pointing to slowing inflation has strengthened hopes that the Fed will slow down its aggressive rate hikes. With the effect of this, the gold price is on track to record the biggest weekly benefit in more than two years. Analysts interpret the market and share their assumptions.
“If the enthusiasm continues, gold will probably rise much more”
Spot gold was trading at $1,761.73, up 0.4% at the time of writing. Prices are up 4.7% so far this week, heading for their biggest profit since July 2020. US gold futures rose 0.6% to $1,764.50. In the middle, the dollar index (DXY) fell 0.3%. As such, it headed for its biggest weekly drop since March 2020. A weaker dollar makes gold more attractive to offshore buyers.
Koindeks.com As you follow, US CPI rose less than expected in October. This was a sign of slowing inflation. It has also raised hopes that the Fed will begin to reduce its high rate hikes. OCBC FX strategist Christopher Wong comments:
The softer-than-expected CPI data supports a step down in the rate of increase at the Fed meeting in December. It is possible that this will cause the dollar trend to trend lower. The occasion provides a window for gold to show a measured recovery. If the enthusiasm in the market continues, the gold price will probably go up much more. It is possible to reach $1,767 in the near term.
“Gold now has higher mobility”
Market participants now see a 71.5% baht for a 50 bps rate hike at the Fed’s December meeting. In the midst of this, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), said on Thursday that the biggest challenge facing central bankers is curbing inflation. High Ridge Futures metal trading manager David However, comments on the latest developments as follows:
There is an expectation that the Fed will start to slow the pace of these rate hikes as we start to see data showing that inflation is falling. Therefore, it is possible to say that the dramatic pressure on the gold market in the last few months has been lifted. We can also argue that gold now has higher mobility.
“This is where the price of gold explodes”
The dollar fell 2% to a two-month low following the US data. This made gold cheaper for holders of other currencies. Indicator US 10-year Treasury yields also hit a one-month low. In a note, OANDA senior analyst Edward Moya highlights:
A chilly inflation report convinced markets that the Fed would move on to a half-point rate hike. Presumably, the markets are waiting for the tightening to be loosened after the FOMC meeting in March. Gold is exploding here. Also, if the dollar weakness continues, it is possible to take a steady path towards the $1,800 level.
“US CPI also brought very good news for the gold price”
In a statement after the CPI data, AvaTrade chief market analyst Naeem Aslam draws attention to the following issues:
Inflation eventually began to drop to a rock in the United States. This is the best news anyone can expect. The dollar index fell in the wake of this data as “traders know that inflation is moving on the real side”. The US inflation data also brought very good news for the gold price, which is currently well above the 1,700 price level. One thing is for sure, the Fed will continue to raise interest rates. However, there is no need to be aggressive in this regard. This means that the rate of increase in interest rates will now slow down.
“Gold price will remain under pressure amid hawk central banks”
Gold is holding above the key $1,700 mark. However, economists at ANZ Bank expect the yellow metal to remain under pressure as the dollar holds its ground. In this context, analysts make the following assessment:
The hawkish tone of central banks keeps US real yields and the US dollar on a strong footing. Calm horrors are mounting due to rising rates and sticky inflation. We’re seeing some faithful harbor flows. However, it is not enough to reverse the downward trend in the near future. We expect gold to remain under pressure.