The gold price rose for the second day in a row on Thursday, hitting $1,880. Thus, it reached the highest level of the last two weeks. Meanwhile, the US Federal Reserve continues its cautious stance on interest rates. Therefore, the US Dollar and US Treasury yields remain on the defensive for now. Now all eyes are on the critical CPI data coming from the USA.
Gold price rose after Fed Minutes
cryptokoin.com As you follow from , minutes of the Fed’s September monetary policy meeting showed Wednesday that board members agreed interest rates should remain restrictive for a while longer. It also revealed that risks of excessive tightening are now balanced. The minutes also included the following statements: “All participants” agreed that the committee was in a position to “proceed with caution.”
The latest dovish Fed minutes, which appear to be a cautious shift in the Fed’s tightening approach, have led to a new decline in US Treasury bond yields, reducing the likelihood of the Fed raising interest rates this year. The US Dollar briefly jumped in initial reaction to the release of the FOMC Minutes. However, it subsequently capitulated to dovish Fed expectations and falling Treasury yields. Thus, it opened a door for the gold price. Following this, gold rose to its highest level in two weeks at $ 1,877.
US PPI came above expectations
On Wednesday, the US PPI rose 0.5% on a monthly basis, after increasing 0.7% in August. Economists predicted that PPI would increase by 0.4%. In the past 12-month period, PPI increased by 2.2% after increasing by 2.0% in August, surpassing the expectation of a 1.6% increase.
Meanwhile, Fed Chairman Christopher Waller talked about the need for higher interest rates. Waller said this would help the Fed slow inflation and the center. So, he joined the chorus of his colleagues. Markets are currently pricing the probability of the Fed raising interest rates in November at only 8.5%, down from 13% the day before. Meanwhile, markets see the probability of an interest rate hike in December as 26%.
All eyes are on critical US CPI data for the gold price
Earlier on Thursday, the gold price extended its previous rise as the US Dollar continued its downward move in anticipation of a soft US Consumer Price Index (CPI) report that could reinforce the Fed’s pause on interest rate hikes for this year. In such a case, gold price may catch a new wave of bids to test the $1,900 level. A higher-than-expected US CPI is likely to trigger a pullback in the gold price. It is also likely to provide temporary support to the US Dollar.
It is seen that the annual CPI in the USA slowed down from the 3.7% increase in August and increased to 3.6% in September. Additionally, expectations are that core CPI will decrease from 4.3% to 4.1% in the month in question. Senior Analyst Yoham Elam makes the following assessment:
More importantly, the economic calendar points to a 0.3% increase on a monthly basis. This means an increase of roughly 4% on an annual basis. I mean, it’s very hot. This would also be a repeat of last month’s result. These expectations are very high. You ask why? Recent ISM surveys point to a decline, and recent wage data has also shown moderation. Average Hourly Earnings increased by just 0.2% for August, below the 0.3% expected. As noted above, wages tend to fall slowly and play a critical role in inflation.
Gold price technical analysis: There are doubts about the rise!
Market analyst Dhwani Mehta evaluates the technical outlook for gold as follows. The daily chart of gold price shows that the shiny metal is at a critical point, challenging the short-term descending 21-Day Moving Average (DMA) level at $1,879. The 14-day Relative Strength Index (RSI) indicator is just below the middle line. This raises doubts about the further rise in the gold price.
A daily close above the 21 DMA barrier at $1,879 is needed to confirm a reversal of the rally from multi-month lows. In this case, the next upside target lies at the $1,900 threshold. At this level is the 50 DMA, which is slightly bearish. Even higher, a fresh move towards the $1,926 resistance should not be ruled out. This level is where the 100 and 200 DMAs meet. On the downside, gold price is likely to see initial demand near the $1,860 region. Below this, it is possible to test Tuesday’s low of $1,853. Deeper declines are likely to push the $1,840 round figure.
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