Gold pushed its gains to a nearly three-month high on Friday. The yellow metal posted its best week in more than 2.5 years as signs of cooling US inflation bolster bets that the Fed will be less hawkish on rate hikes. Analysts interpret the market and share their forecasts.
“Gold prices follow US CPI”
Spot gold closed Friday at $1,770, up 0.84%. The bright metal is up over 5% so far this week. U.S. gold futures, on the other hand, were last up 0.9% at $1,769.4. . Bob Haberkorn, senior market strategist at RJO Futures, comments:
We see a follow-up in gold prices in yesterday’s CPI data. We anticipate a weaker dollar and the likelihood of the Fed raising half a percentage point against the 75bps gain.
“Precious metals bulls get their wages”
Gold is trading above its 50-day and 100-day moving averages, which traders consider bullish signals. Jim Wyckoff, senior analyst at Kitco Metals, comments:
The precious metals bulls are taking their toll this weekend as their short-term technical stances, the US dollar index (DXY) and US Treasury yields are lowering while also rising.
“The probability of gold reaching $1,800 has become much more likely”
cryptocoin.com As you can follow, US consumer prices rose less than expected in October. Thus, the data showed that annual inflation was below 8% for the first time in eight months. This triggered a sharp drop in the dollar, making gold more attractive to other currency holders. Markets see a 71.5% chance for a 50bps rate hike at the Fed’s December meeting. Michael Hewson, chief market analyst at CMC Markets UK, explains:
The weaker-than-expected CPI figure, along with the notable shift we’ve seen from recent Fed speakers, has changed the narrative when it comes to returns. With a technical break above the October tops, the chances of gold hitting $1,800 become much more likely.
“Gold had a great week, but…”
DXY continued to slide after data from the University of Michigan on Friday showed that the US consumer outlook indicator dropped 5.2 index points in November from 59.9 in October. Inflation expectations for next year rose to 5.1% from 5% in the previous month. In addition, five-year inflation expectations rose to 3% from 2.9% in October. City Index and FOREX market analyst Fawad Razaqzada comments:
Rising prices are stifling global economic growth, which could also affect demand for precious metals. Gold had a great week. But now everything depends on the dollar. The dollar isn’t dead, I don’t think so.
“One-eyed, still king in the land of the blind!”
Razaqzada cites an old adage to say that the dollar is still remarkable. “The one-eyed is still king in the land of the blind,” he says. Therefore, he does not expect to see any further significant weakness in the dollar after the recent pullback. The analyst comments, “If the dollar does not see any significant weakness from here, this gold should hold back.” Razaqzada says the focus of gold next week will be on retail sales from China and the US, and GDP from the Eurozone, among other things.
“Gold has upside potential in this case”
Gold price rose to $1,770 after US inflation data paved the way for gold. However, Commerzbank economists say today’s Commodity Futures Trading Commission (CFTC) data will likely curb the rally if shorts are cut. In this context, economists make the following statement:
US CPI rose much less than expected in October. This lowered the Fed’s rate hike expectations. It also put pressure on the US Dollar. Hence, it caused US bond yields to drop noticeably. Yesterday’s price response shows once again that gold has significant upside potential once the Fed’s rate hikes come to an end.
“The status of short positions in CFTC data is important”
However, according to economists, if the CFTC data shows that short positions are decreasing, the rally of gold will stop. They explain their assessment as follows:
Today’s CFTC data is likely to reveal whether the increase in gold price is attributed to speculative shorts. If short positions have actually decreased significantly in the last reporting week, an important factor driving price will disappear in the future. If so, the power of the ascension may run out.
