Gold witnessed a decrease in its price on Thursday, responding to the US consumer prices that showed a rise more than anticipated in September. With a heightened dollar and Treasury yields:
- Spot gold declined by 0.3% reaching $1,868.59 per ounce.
- U.S. gold futures recorded a drop of 0.2%, settling at $1,883.
- The consumer price index experienced a 0.4% surge in September, following a 0.3% rise in August, as reported by the Labor Department.
- Yearly consumer prices have recorded a decline from their peak of 9.1% in June 2022.
Analyst Views and Future Predictions
According to Tai Wong, an independent metals trader based in New York, the recent CPI data might cause a slight pause in gold’s robust rally. However, he believes it won’t lead to a severe sell-off due to ongoing geopolitical tensions.
Edward Moya, a senior market analyst at OANDA, stated, “Despite indicators of a potential slowdown in the US economy, this should prove favorable for gold.” He anticipates gold prices may fluctuate between $1,860-$1,920 in the upcoming times.
Impact of Geopolitical Tensions
Gold’s intrinsic value as a safe-haven asset during politically volatile times remains undisputed. The ongoing conflict escalation between Israel and the Palestinian militant Islamist group, Hamas, is generating apprehension among investors. Investors are concerned about a potential ground invasion by the Israeli army following humanitarian aid distributions in Gaza and the safe release of hostages. The underlying fear of Iran’s possible involvement in the Israel-Palestine disputes is further solidifying, driven by potential sanctions on both Palestine and Iran to curb funding for the Hamas military.
Gold’s Relationship with US Treasury Yields and Economic Data
Gold’s price remains closely intertwined with long-term US Treasury yields. Notably, these yields jumped to a high of 5%, in line with expectations of forthcoming US economic data. The focus now shifts to:
- The US Q3 GDP data that will be made public this week, which is expected to provide insights into the Fed’s interest rate trajectory.
- An optimistic growth rate in the July-September quarter would signify positive labor market conditions, increased consumer spending, and an overall economic recovery, despite the Federal Reserve’s stringent monetary policies.
Upcoming US Economic Indicators
There is a keen anticipation among investors regarding:
- The annualized growth rate, which economists project to be 4.1%, compared to the previous reading of 2.1%.
- The Manufacturing PMI for October, which is expected to remain below the 50.0 threshold.
- The Services PMI, anticipated to be slightly below 50.0.
Federal Reserve’s Stance on Interest Rates
The recent release of the S&P Global PMI data has revealed gold price’s intermediate support. With the CME Fed watch tool predicting a 38% likelihood of a rate hike in December by the Fed, a major shift from the previous 28% prediction, the future looks intriguing.
Federal Reserve policymakers have consistently been voicing their support for keeping interest rates unchanged. This sentiment was echoed by Loretta Mester, the Cleveland Fed Bank President, and Raphael Bostic, the Atlantic Fed Bank President. Both emphasized the need for flexibility in dealing with current economic uncertainties, with Bostic further hinting at a possible interest rate cut in late 2024.
Technical Analysis and Currency Movements
Gold’s price showed a recovery after a slight drop to around $1,970.00. It is poised to regain its five-month high of nearly $2,000.00, supported by a bullish momentum indicated by oscillators. On the currency front:
- The Nigerian naira (NGN) emerged as the top performer among 20 global currencies.
- The euro (EUR) lagged, while the US dollar led among major currencies.
- The Mexican peso (MXN) underperformed among emerging markets.
In conclusion, both geopolitical concerns and economic data are having a significant impact on gold prices at this important juncture. Its future course will be largely determined by what happens in the upcoming weeks. It will be crucial for traders and investors to closely monitor US economic data as well as world developments.