- Gold price is on the rise for the third successive day and is now getting closer to a multi-month peak.
- The safe-haven metal continues to be supported by the risk of an escalation in the Middle East conflict.
- Gains ahead of the US PCE Price Index seem limited amid bets on further policy tightening by the Fed.
Gold price (XAU/USD) attracts some buying for the third day in a row on Friday and remains supported by a steady demand for safe-haven assets due to the ongoing conflict in the Middle East, as well as a lack of price movement in the US Dollar (USD). The precious metal maintains its bid tone through the early European session, albeit remains below its five-month high reached last Friday in the wake of expectations that the Federal Reserve (Fed) would need to raise interest rates further.
Traders also seem reluctant to place aggressive directional bets around the Gold price amid a positive risk tone and ahead of the release of the Personal Consumption Expenditure (PCE) Price Index from the United States (US). The data will influence expectations about the Fed’s policy move next week, which, in turn, will influence the USD and provide a fresh impetus to the non-yielding yellow metal. Nevertheless, the XAU/USD seems poised to register modest gains for the third straight week.
Daily Digest Market Movers: Gold price consolidates in a range below a multi-month top ahead of US PCE data
- Geopolitical tensions continue to underpin the safe-haven Gold price, though hawkish Federal Reserve expectations hold back bulls from placing aggressive bets.
- Israeli troops and tanks carried out a brief yet relatively large ground incursion into Gaza on Thursday ahead of the widely expected full-scale ground invasion.
- The US military launched airstrikes early Friday on two locations in eastern Syria in retaliation to a slew of drone and missile attacks against American troops in the region.
- US President Joe Biden sends a direct message to Iran’s Supreme Leader and warns against targeting US bases and personnel in the Middle East.
- Data released on Thursday showed that the US economy expanded by a 4.9% annualized pace in the third quarter – its fastest growth in nearly two years.
- The US economic resilience should allow the Fed to stick to its hawkish stance and keep the door open for one more rate hike by the year-end.
- The release of weaker-than-expected US inflation and disposable income data reaffirm bets that the Federal Reserve will maintain the status quo in November.
- Investors now look forward to the release of the US PCE Price Index data for cues about the Fed’s next policy move and before placing fresh directional bets.
Technical Analysis: Gold price is nearing overbought territory and could struggle to make it through $2,000
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is hovering around the 70 mark. This suggests that the Gold price is nearing overbought territory and warrants some caution for bullish traders. Hence, any subsequent move up might continue to confront stiff resistance ahead of the $2,000 psychological mark. The said handle should act as a key pivotal point for short-term traders, which if cleared decisively should pave the way for a move towards the next relevant hurdle near the $2,022 area.
On the flip side, the $1,980 region is likely to protect the immediate downside ahead of the $1,972-$1,970 zone. A convincing break below the latter could drag the Gold price back towards the weekly low, around the $1,953-1,952 zone touched on Tuesday. Some follow-through selling could expose a technically significant 200-day Simple Moving Average (SMA) support, currently pegged near the $1,932-1,931 region.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.24% | 0.25% | 0.75% | -0.30% | 0.24% | 0.11% | 0.56% | |
| EUR | -0.24% | 0.00% | 0.51% | -0.53% | -0.01% | -0.13% | 0.35% | |
| GBP | -0.23% | 0.00% | 0.51% | -0.53% | 0.01% | -0.14% | 0.36% | |
| CAD | -0.75% | -0.51% | -0.52% | -1.05% | -0.51% | -0.65% | -0.16% | |
| AUD | 0.30% | 0.56% | 0.55% | 1.04% | 0.55% | 0.39% | 0.88% | |
| JPY | -0.24% | 0.00% | -0.02% | 0.50% | -0.55% | -0.13% | 0.35% | |
| NZD | -0.10% | 0.14% | 0.14% | 0.64% | -0.39% | 0.15% | 0.49% | |
| CHF | -0.60% | -0.36% | -0.35% | 0.15% | -0.89% | -0.35% | -0.49% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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