On Monday (November 13th), the European market entered the session with relatively positive sentiment, with the US dollar stabilizing and gold prices hovering at nearly three week lows. Currently, the market is focused on US inflation data. Last week, Federal Reserve Chairman Powell countered the market's bet of early interest rate cuts, and investors will gain clues about monetary policy from more data.
Gold prices hovered near a three week low on Monday as investors waited for US inflation data as the US dollar strengthened to obtain more clues on whether the Federal Reserve would keep interest rates unchanged or raise them.
After plummeting over $50 last week, spot gold fluctuated narrowly around $1935, waiting for further clues.
Last week, gold prices fell 2.8%, marking their largest weekly decline in over a month, as the hawkish remarks of Federal Reserve Chairman Jerome Powell dispelled the idea of interest rate cuts.
Nicholas Frappell, Global Head of Institutional Markets at ABC Refinery, said, "People are concerned about whether CPI data will cause the Federal Reserve to pause or raise interest rates. So I think the market was a bit sideways before these data were released
The US Consumer Price Index (CPI) will be released on Tuesday. A survey shows that the core CPI is expected to increase by 0.3% month on month and 4.1% year-on-year in October. Both estimated increases remain unchanged from September.
The US dollar rose 0.1% against other currencies after hitting a one week high on the previous trading day, making gold less attractive to holders of other currencies.
The US dollar index, which measures the value of the US dollar against other major currencies, slightly strengthened around 105.80 and maintained most of last week's gains.
The market also digested the news that Moody's lowered its outlook for the US credit rating to "negative" late last Friday, while the focus shifted to the US Consumer Price Index released on Tuesday.
Federal Reserve policy makers, including Federal Reserve Chairman Jerome Powell, hinted last week that the battle against inflation may not be over yet, which has led to a reduction in market bets on interest rate cuts, which have pushed up short-term Treasury yields and supported the US dollar.
The US dollar rose to 151.85 against the Japanese yen on Monday, its highest level since October 2022. Last week, the weekly increase of the US dollar against the Japanese yen was about 1.4%, marking the largest daily increase in three months.
The US dollar has peaked and the US economy is slowing down, but people will wait for confirmation, "said Kit Jukes, strategist at Societe Generale in France.
Matt Simpson, senior market analyst at City Index, said that in addition to these data, there will be more speeches from Federal Reserve officials this week, who may echo Powell and open the door for further rate hikes.
He said, "Even if we see CPI data weakening, the Federal Reserve may continue to suppress hopes of interest rate cuts because it is not in their interest to cut rates, let alone mention interest rate cuts while inflation is still above target
Last Friday, the holdings of SPDR Gold Trust, the world's largest gold ETF, increased by 0.10% to 868.14 tons.
In addition to geopolitical risk driven hedging demand and central bank purchases, the macroeconomic background is shifting towards supporting gold, "ANZ analysts said in a report
Analysts added: "The US monetary tightening cycle is nearing the end, and the US dollar has peaked. This may lead to the weakening of the US 10-year treasury bond bond yield and the US dollar, which will support the investment demand for gold."
During the Diwali weekend, gold jewelry merchants in India sold well, with recent price declines driving consumer interest.
Due to the war between Israel and Hamas in early October, gold prices skyrocketed, and jewelers were concerned that buyers would hesitate during the holiday period. However, as the likelihood of conflict escalating in November decreases, gold prices have fallen. This may boost sales between October and December, which Indians believe is an auspicious time to wear gold and may help support global gold prices by limiting losses.
Surendra Mehta, National Secretary of the Indian Gold and Silver Jewelry Association, said that on the first day of Diwali, demand from India, the world's second largest consumer of gold, increased by 8%. He said that coins account for about one-third of sales, while the rest is jewelry. Prior to Diwali, the All India Federation of Traders expects sales to exceed 500 billion rupees (6 billion US dollars), particularly in gold, clothing, and household goods.
