Gold Price Talking Points
The price of gold assessments the 50-Day SMA ($1674) because it retraces the decline following the Federal Reserve interest rate decision, and the replace to the US Consumer Price Index (CPI) could prop up the valuable metallic because the report is anticipated to point out easing worth pressures.
Fundamental Forecast for Gold Price: Neutral
The worth of gold trades to a recent weekly excessive ($1676) amid the kneejerk response to the US Non-Farm Payrolls (NFP) report, and bullion could try to retrace the decline from the October excessive ($1730) because it continues to defend the yearly low ($1615).
At the identical time, the US CPI could affect the worth of bullion as each the headline and core studying for inflation are anticipated to slim in October, and proof of slowing inflation could heighten the enchantment of gold because it places strain on the Federal Reserve to winddown the hiking-cycle.
Source: CME
As a end result, expectations for a shift in Fed coverage could drag on US yields because the CME FedWatch Tool displays a larger than 50% likelihood for a 50bp fee hike, however a higher-than-expected CPI print could present the Federal Open Market Committee (FOMC) with larger scope to pursue a extremely restrictive coverage as Chairman Jerome Powell insists that “it is extremely untimely” to pause the hiking-cycle.
In flip, indicators of sticky worth progress could drive the FOMC to take care of its current strategy in combating inflation as Chairman Powell emphasizes that “we have not seen inflation coming down,” and the worth of gold could proceed to face headwinds over the rest of the 12 months because the central financial institution retains a hawkish ahead steerage for financial coverage.
With that mentioned, gold could mirror the worth motion from final month if it struggles to carry above the 50-Day SMA ($1674), however a downtick within the US CPI could prop up the worth of bullion because it dampens hypothesis for one more 75bp Fed fee hike.
— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong
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