Gold prices experienced a notable ascent on Wednesday, reaching a more than one-week high, fueled by a decline in the U.S. dollar and Treasury yields. This shift came in response to subdued inflation data, leading investors to speculate that a U.S. rate cut might occur sooner than initially anticipated.
As of 1224 GMT, spot gold exhibited a 0.4% increase, reaching $1,970.45 per ounce, marking its highest point since November 7. Concurrently, U.S. gold futures also saw a 0.4% uptick, reaching $1,974.70.
Market observers are now closely monitoring U.S. retail sales and producer price data scheduled for release at 1330 GMT. Economists polled anticipate a 0.1% increase in producer prices for the last month, contrasting with a 0.5% uptick observed in September.
Ricardo Evangelista, Senior Analyst at ActivTrades, commented on the potential impact of the upcoming data, stating, “Today’s data release could compound the losing streak for the U.S. dollar, should the figures fall below expectations. Against this background, risk is on the upside for gold.”
Tuesday’s data indicated that U.S. consumer prices remained unchanged in October, with the annual rise in underlying inflation registering the smallest increase in two years. In response to the Consumer Price Index (CPI) data, the U.S. dollar slumped to a more than two-month low, while benchmark U.S. 10-year Treasury yields dropped to their lowest level since September 22.
The depreciation of the U.S. currency rendered dollar-priced gold more affordable for holders of other currencies, contributing to the upward trajectory of gold prices. As investors reassess the likelihood of a rate hike at the Federal Reserve’s December meeting, expectations for a rate cut in May 2024 have surged to around 50%, up from 34% before the latest data, as reported by the CME Group’s FedWatch Tool.
Ricardo Evangelista expressed optimism about the future outlook for gold, stating, “I can see further upside for gold. However, this upside may be capped by fading fears of an escalation of the war in Gaza, which had driven safe-haven gains over the last month.”
Lower U.S. interest rates tend to enhance the attractiveness of non-yielding assets like gold. In the broader precious metals market, spot silver observed a 1.3% rise, reaching $23.38 per ounce, while platinum experienced a 0.6% increase, reaching $890.21. Palladium also saw a notable uptick of 1.6%, reaching $1,033.09 per ounce.
