Gold prices traded around the one-month top they gained in the previous session on Wednesday. However, gold remained in a relatively tight range as it positioned ahead of US inflation data late this week. Analysts interpret the market and share their forecasts.
“There is some profit taking after the rally”
cryptocoin.comAs you follow, bullion prices rose more than 2% on Tuesday after falling dollar and bond yields, as well as some technical buying. Spot gold was trading at $1,712 at the time of writing on Wednesday. Thus, the yellow metal was on its way to closing the day horizontally. U.S. Gold Futures, on the other hand, was last traded at $1,717. Stephen Innes, managing partner of SPI Asset Management, comments:
Gold prices are slightly lower due to a combination of factors. The dollar is somewhat firm, yields are up and there is some profit taking after yesterday’s rally.
Two scenarios for gold prices based on US CPI data
Investors’ focus remains on Thursday’s US Consumer Price Index report. The data is likely to provide clues about the Fed’s rate hike stance. According to a Reuters poll, Wall Street economists expect slowdowns in both the monthly and annual core CPI of 0.5% and 6.5%, respectively. Stephen Innes explains:
Prices seem to consolidate ahead of the CPI. If the US CPI data is warmer than expected, a move below $1,690 is possible for gold. If not, the yellow metal is likely to break the $1,725 level.
“Gold breaking these technical levels provides additional support”
Traders are now basically expecting an increase of 50 bps. However, they give a 33% chance of the Fed’s 75 bps march at its December meeting. Gold is considered a hedge against inflation, which rising rates aim to reduce. Therefore, interest rate increases reduce the attractiveness of the shiny metal.
Earlier in the day, gold hit $1,716.82, the highest level since Oct. Thus, gold prices have risen above $100 since the $1,615.59 they saw last week. Tai Wong, a senior trader at New York Heraeus Precious Metals, shares his view:
There seems to be fresh uptake in gold and silver. I think the dollar is pulling back with the Fed looking to slow it down to 50 bps in December.
Oanda analyst Craig Erlam points out that gold has broken $1,680 and then $1,700. In this regard, he says that breaking these technical levels provides an additional boost.
What is behind the gold price increase?
David Meger, Commercial Director of High Ridge Futures Metals, comments on the latest developments:
If we see inflation continue to slowly come down, that will be good for markets overall with less fed rate hike expectations going forward.
Chintan Karnani, research director at Insignia Consultants in New Delhi, attributes the rise in gold prices to weakness in the dollar and a ‘technical buying’ as gold managed to trade above the 50-day moving average. According to FactSet data, the 50-day moving average of December gold stands at $1,680.99.
In addition, Karnani says that gold is also shorting as prices exceed $1,700. The analyst notes that December gold is now facing resistance at the 100-day moving average. FactSet fixed the 100-day moving average at $1,731.16.
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