Gold prices extended a rally to hit a two-month high on Monday as investors held onto the view that central banks would keep interest rates low for the time being, with focus turning to key U.S. inflation data due later in the week.
Spot gold rose 0.2% to $1,819.52 per ounce by 0623 GMT, having hit its highest since Sept. 7 earlier in the session. U.S. gold futures gained 0.3% to $1,822.10.
Major central banks last week stuck to the view that current inflationary pressures would fade, dimming the prospect for faster rate hikes.
Analysts said a better-than-expected U.S. payrolls report on Friday was also unlikely to change the Fed’s dovish stance, with market participants now focusing on Wednesday’s key Consumer Price Index reading.
“Inflation data will have to be markedly above expectation for any sort of jolt back into the fear of higher interest rates, but as long as it comes out in line with or slightly above expectations, I don’t think anybody will panic,” IG Markets analyst Kyle Rodda said.
Rodda said a break above $1,830 could drive a rally towards $1,900 in gold, though it would likely trend lower in the long term as central banks eventually tighten policies to control high inflation.
Gold benefits from lower interest rates as they reduce the opportunity cost of holding non-yielding bullion.
But Jeffrey Halley, a senior market analyst at OANDA, said in a note that gold’s rally could have attracted “the usual rush of trend-following and fast money buyers”.
“If past performance is a judge, none of that positioning is ‘sticky’ and those fast-money buyers will rush for the exit door and sell as soon as gold starts moving lower, causing another downside spike,” Halley said.
Spot silver rose 0.4% to $24.27 per ounce. Platinum gained 0.7% to $1,041.66 and palladium climbed 0.8% to $2,050.78.
· Gold Price Forecast: XAU/USD eyes a smooth sail towards $1,830 and $1,834 – Confluence Detector
Gold price remains on track for additional upside, as buyers seize control above the $1,800 mark after the solid comeback seen in the previous week. The Fed’s dovish stance on interest rates hike combined with lower levels of US labor force participation bolstered gold’s upsurge. However, the latest rebound in the US dollar alongside the Treasury yields, despite the cautious risk tone, could likely threaten gold’s bullish streak ahead of Fed Chair Jerome Powell’s speech.
Gold Price: Key levels to watch
The Technical Confluences Detector shows that gold is challenging the previous high one-hour at $1,821.
On buying resurgence, gold price could see a quick advance towards the pivot point one-day R1 at $1,830.
The next upside barrier is envisioned at $1,834, September highs. A firm break above the latter could open doors towards $1,838, the pivot point one-week R1.
On the flip side, sellers need acceptance below a dense cluster of healthy support levels around $1817 to temporarily negate the upside momentum.
That level is the confluence of the pivot point one-month R1 and the previous low four-hour.
The previous month’s high of $1814 will be next on the bears’ radars. Further south, the Fibonacci 23.6% one-day at $1810 will be targeted.
A breach of the latter will fuel a fresh downswing towards $1805, where the Fibonacci 23.6% one-week coincides with the Fibonacci 38.2% one-day.
· Yuan steady against a firm dollar after strong China trade data
The yuan hovered around 6.40 per dollar on Monday as strong Chinese trade data lent support and helped offset strength in the greenback amid U.S. monetary tightening expectations.
The spot yuan opened at 6.3975 per dollar and was changing hands at 6.3971 at midday, slightly firmer than the previous late session close.
· Dollar firms as U.S. inflation poses next test
The dollar made a steady start to the week in Asia on Monday but stayed below Friday peaks, as currency traders seek a path between markets’ volatile rate projections and central bankers vowing a wait-and-see approach despite surging inflation.
The U.S. dollar index rose 0.1% to 94.308.
Later on Monday no fewer than six Fed officials are speaking, with the most attention likely to be on Vice Chair Richard Clarida who is talking on Fed and ECB policy.
Goldman Sachs, which recently pulled forward its Fed hike expectations from the third quarter of 2023 to July 2022, believes the earlier hike could support the greenback.
· High euro zone inflation temporary, ECB's Lane says
Euro zone inflation will ease next year and remains too weak in the medium term, European Central Bank chief economist Philip Lane told a Spanish newspaper, repeating the bank’s long-standing message that high price growth is temporary.
· BOJ policymakers stress need to keep easy policy on weak inflation
Bank of Japan (BOJ) policymakers see the need to maintain ultra-easy policy as inflation is rising only modestly and wage growth remains feeble, a summary of opinions from their October meeting showed on Monday.
The nine-member board also sounded sanguine about recent yen declines, with one member saying it reflected the differentials in the inflation and monetary policy stances between Japan and other countries.
Supply constraints and rising global commodity costs have pushed up inflation across the globe, prodding some central banks to raise interest rates or ponder withdrawing stimulus.
While rising energy and food costs are pushing up prices in Japan, inflation remains well below the BOJ's 2% target as weak consumption discourages firms from passing on higher costs to households.
· China’s coal imports in October nearly doubled from a year ago
China imported nearly twice as much coal in October as it did a year ago, despite signs the country’s power shortage is easing, according to customs data released Sunday.
Monthly purchases of coal reached 26.9 million tons in October, up 96.2% from a year ago, according to data accessed through Wind Information.
However, that was down 18.2% from 32.9 million tons in September.
· Japan cuts economic view after key indicator falls to lowest in a year
Japan cut its view on economic conditions for the first time in more than two years after the coincident indicator index extended its decline in September, falling to the lowest in a year.
The government on Monday lowered its assessment of the index to “weakening” from “improving” in its first downgrade since August 2019.
· Global COVID-19 cases hit 250 million, eastern Europe infections at record levels
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