Gold price aims to extend recovery above $1,970.00 as a substantial decline in the US consumer inflation in October indicates that the Federal Reserve will likely not raise interest rates further.
The US inflation data for October, released on Tuesday, indicated that headline inflation decelerated significantly. The annual headline CPI rose by 3.2%, softened from estimates of 3.3% and the former reading of 3.7%. This was the slowest growth in headline inflation in more than two years.
A significant decline in the headline inflation rate was prompted by a sharp fall in global Oil prices.
Rental prices continued to rise in October but at a slower pace than in September. Food and grocery prices expanded at a higher pace of 0.3%.
Monthly core inflation, which takes out volatile Oil and food prices grew by 0.2% against estimates – and September’s growth rate – of 0.3%. Annual core inflation rose by 4.0%, decelerated from expectations and the prior release of 4.1%.
Though core inflation declined more than expectations, the pace of decline was nominal, which indicates lingering stickiness. This remained a major concern for Federal Reserve policymakers last week, which forced them to lean toward raising interest rates further.
Last week, Federal Reserve Chairman Jerome Powell commented that the central bank won’t hesitate in tightening monetary policy further as a failure to control inflation would be their biggest mistake.
After the release of the US inflation data, Richmond Federal Reserve Bank President Thomas Barkin, speaking at an event in South Carolina, said the core inflation was partly offset by supply shortages.
Thomas Barkin added that the central bank is making real progress on inflation but is not convinced inflation is on a smooth glide path back to its 2% target (for Core CPI). Barkin warned that the Fed needs to do more to curb demand and inflation.
Latest inflation figures have turned the tide in favor of keeping interest rates unchanged by the Fed in the range of 5.25-5.50%. Economists hope that the Fed is done with hiking interest rates and that discussions about cutting interest rates will be early.
The US Dollar Index (DXY) faced an intense sell-off after the release of the soft inflation report. The USD Index has refreshed its two-month low near 104.00 as easing inflationary pressures accelerated risk-taking. 10-year US Treasury yields fell sharply to 4.43%.
Going forward, investors will focus on the monthly US Retail Sales data and Producer Price Index (PPI) for October, which will be published at 13:30 GMT.
As per the consensus, the US Retail Sales contracted by 0.3% against an expansion of 0.7% in September. A sharp decline in consumer spending could keep pressure on the US Dollar.
In addition to the US economic data, US President Joe Biden’s meeting with China’s President Xi Jinping at the White House will be keenly watched. Discussions about the Israel-Palestine war are widely anticipated.
Gains in Gold could be limited due to risk-on mood and easing Middle East tensions.
Technical Analysis: Gold price climbs above $1,970
Gold price jumps close to $1,970.00 after the release of the soft US inflation report. The precious metal resumed its upside journey after discovering significant buying interest near the 50-day Exponential Moving Average (EMA). The recovery in Gold has been extended above the 20-day, which indicates that the broader appeal has turned extremely bullish.
The US inflation data for October, released on Tuesday, indicated that headline inflation decelerated significantly. The annual headline CPI rose by 3.2%, softened from estimates of 3.3% and the former reading of 3.7%. This was the slowest growth in headline inflation in more than two years.
A significant decline in the headline inflation rate was prompted by a sharp fall in global Oil prices.
Rental prices continued to rise in October but at a slower pace than in September. Food and grocery prices expanded at a higher pace of 0.3%.
Monthly core inflation, which takes out volatile Oil and food prices grew by 0.2% against estimates – and September’s growth rate – of 0.3%. Annual core inflation rose by 4.0%, decelerated from expectations and the prior release of 4.1%.
Though core inflation declined more than expectations, the pace of decline was nominal, which indicates lingering stickiness. This remained a major concern for Federal Reserve policymakers last week, which forced them to lean toward raising interest rates further.
Last week, Federal Reserve Chairman Jerome Powell commented that the central bank won’t hesitate in tightening monetary policy further as a failure to control inflation would be their biggest mistake.
After the release of the US inflation data, Richmond Federal Reserve Bank President Thomas Barkin, speaking at an event in South Carolina, said the core inflation was partly offset by supply shortages.
Thomas Barkin added that the central bank is making real progress on inflation but is not convinced inflation is on a smooth glide path back to its 2% target (for Core CPI). Barkin warned that the Fed needs to do more to curb demand and inflation.
Latest inflation figures have turned the tide in favor of keeping interest rates unchanged by the Fed in the range of 5.25-5.50%. Economists hope that the Fed is done with hiking interest rates and that discussions about cutting interest rates will be early.
The US Dollar Index (DXY) faced an intense sell-off after the release of the soft inflation report. The USD Index has refreshed its two-month low near 104.00 as easing inflationary pressures accelerated risk-taking. 10-year US Treasury yields fell sharply to 4.43%.
Going forward, investors will focus on the monthly US Retail Sales data and Producer Price Index (PPI) for October, which will be published at 13:30 GMT.
As per the consensus, the US Retail Sales contracted by 0.3% against an expansion of 0.7% in September. A sharp decline in consumer spending could keep pressure on the US Dollar.
In addition to the US economic data, US President Joe Biden’s meeting with China’s President Xi Jinping at the White House will be keenly watched. Discussions about the Israel-Palestine war are widely anticipated.
Gains in Gold could be limited due to risk-on mood and easing Middle East tensions.
Technical Analysis: Gold price climbs above $1,970
Gold price jumps close to $1,970.00 after the release of the soft US inflation report. The precious metal resumed its upside journey after discovering significant buying interest near the 50-day Exponential Moving Average (EMA). The recovery in Gold has been extended above the 20-day, which indicates that the broader appeal has turned extremely bullish.