In a market response to the Federal Reserve’s perceived conclusion of its policy tightening cycle, gold prices witnessed an upward trend on Thursday, although gains were tempered by a strengthened U.S. dollar.
As of 0754 GMT, spot gold saw a 0.4% increase, reaching $1,966.41 per ounce, while U.S. gold futures also rose by 0.3% to $1,969.10.
City Index senior analyst Matt Simpson noted, “Gold’s strong rebound from its 200-day average gives bulls the upper hand (in) the near-term, so we prefer to buy dips above 1,940 for a potential move to the 1,985–2,000 range.”
Despite a higher U.S. dollar attempting to regain losses, gold’s volatility has stabilized around $1,960 following the initial excitement post the U.S. inflation report.
The U.S. dollar’s gains were extended by robust economic data, rendering gold more expensive for international buyers.
In October, U.S. producer prices experienced the most significant decline in three-and-a-half years, primarily due to a sharp reduction in gasoline costs. Simultaneously, retail sales registered their first decline in seven months.
Tuesday’s data further revealed that U.S. headline consumer prices remained flat in October, contrary to the anticipated 0.1% rise. Core CPI also fell short of expectations at 0.2%, compared to the forecasted 0.3%.
The indications of slowing inflation have spurred investor confidence that the Federal Reserve may have concluded its rate-hiking phase. The prevailing expectation among traders, as reflected in the CME FedWatch tool, is that the central bank will maintain unchanged rates in December and initiate cuts by May.
Gold’s appeal tends to rise with lower interest rates, as the non-yielding bullion is often sought as a hedge against inflation. ANZ analysts highlighted, “Increasing conviction around the narrative of ‘higher-for-longer’ rates is tarnishing the investment appeal of gold in the near term. Nevertheless, we see strategic buying emerging after the recent price correction as long-term drivers remain in place.”
In the broader precious metals market, spot silver saw a 0.5% increase to $23.55 per ounce, platinum rose by 0.2% to $897.37, and palladium gained 0.9% to $1,040.69 per ounce.
