Gold advances to fresh multi-week highs above $1,920
Gold extended its daily rally and climbed above $1,920 for the first time in over two weeks on Friday. Escalating geopolitical tensions ahead of the weekend weigh on T-bond yields and provide a boost to XAU/USD, which remains on track to gain nearly 5% this week.
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The Gold price brief recaptured the key short-term descending 21-Daily Moving Average (DMA) at $1,878 but failed to yield a daily closing above the latter.
The 14-day Relative Strength Index (RSI) indicator is lying just below the midline, suggesting that the upside attempts appear temporary in Gold price.
Failure to seek a weekly close above the 21 DMA at $1,878 could reinforce bearish interest, fuelling a fresh downswing toward Wednesday’s low of $1,859.
The next relevant support is seen at the $1,850 psychological level.
On the upside, recapturing the 21 DMA barrier on a sustained basis will confirm a bullish reversal from multi-month troughs. Gold buyers will then target the $1,900 threshold. At that level, the mildly bearish 50 DMA coincides.
Further up, powerful resistance around the $1,925 level could be challenged, where the 100 and 200 DMAs hang around.
Investors reassess renewed hawkish US Federal Reserve (Fed) expectations, spurred by the unexpectedly hot Consumer Price Index (CPI) data from the United States. The US CPI increased 0.4% last month after a 0.3% gain in August, the Labor Department said on Thursday. On an annual basis, the CPI inflation steadied at 3.7% in September, at the same pace as seen in August while beating estimates of a 3.6% rise.
The US inflation data reinforced the Fed’s “higher rates for longer” narrative, lifting the US Dollar and the US Treasury bond yields from their recent two-week troughs. Gold price, thereafter, reversed sharply from a two-week high above $1,880 and tested bids below the $1,870 mark, as the revival of hawkish Fed bets dented risk sentiment, aiding the US Dollar rebound.
Commenting on the latest inflation report, Boston Fed President Susan Collins said that it underscores uneven progress toward restoring price stability, reiterating her view that the central bank might have to raise rates again to combat inflation.
The probability of a rate hike in December from the Fed spiked up to 38%, according to the CME Fedwatch tool, compared with about a 28% chance seen before the report. Currently, markets price a 30% chance of a final Fed rate hike in December.
The reaction to the US CPI report was short-lived, as the US Dollar sellers have returned on Friday, even though risk sentiment remains sour after softer-than-expected Chinese CPI and Producer Price Index (PPI) data.
China’s Consumer Price Index (CPI) stagnated at 0% YoY in September after accelerating by 0.1% in August. The market expected an increase of 0.2%. China’s Producer Price Index (PPI) dropped 2.5% YoY in September, compared with a 3.0% decline registered previously. The market forecast was for a 2.4% decline.
Attention now turns toward the US Preliminary UoM Consumer Sentiment and Inflation Expectations data for fresh cues on the Fed’s interest rate outlook. Speeches from Fed policymakers will also play a pivotal role in influencing the US Dollar valuations alongside the end-of-the-week flows.
SPECIAL WEEKLY FORECAST
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Gold capitalized on safe-haven demand amid escalating geopolitical tensions and gathered bullish momentum to start the week. As US Treasury bond yields turned south on dovish Federal Reserve (Fed) expectations, XAU/USD extended its rally and snapped a two-week losing streak. Next week’s economic calendar will not offer any high-tier data releases that could impact the pair’s action in a noticeable way.