With the continued strength of the US dollar, the price of gold XAU/USD fell, stable around the level of 1668 dollars an ounce.
- The bearish pressure continues as investors cautiously await the expected US inflation data in an attempt to assess the next move of the Federal Reserve regarding US interest rates.
- Overall, bullion prices had a lackluster year, hitting their highest level of the year in March amid the Russian invasion of Ukraine before tumbling around 18% as monetary tightening by global central banks weighed on the precious metal.
Comments from BoE Governor Andrew Bailey regarding the removal of the emergency support by Friday helped push bullion prices lower this week.
Latest Economic Data
Prices paid to US producers rose more than expected, suggesting that inflationary pressures will take time to moderate and keep the Fed on its strong track to raise interest rates. Officials from the central bank have committed to raising interest rates to a restricted level in the near future to curb inflation, although some have pointed out the importance of calibrating the increases to mitigate risks.
All in all, investors are very anxious as they await US consumer price numbers later on Thursday that may determine whether the Fed will introduce a fourth consecutive major rate hike, which will add to the pressure on bullion. Commenting on performance and stress factors. “The disproportionate risk of CPI printing is that the market is not ready for a large print of the downside,” Nikki Shils, metals analyst at MKS PAMP SA, said in a note. She added that subsequent prices for metals and precious commodities will depend on how the US dollar reacts to the data.
US central bank policy
Neil Kashkari, the president of the Minneapolis Fed, said the impediment to turning the Fed away from monetary tightening is "very high" amid continued strength in core inflation. The official stated, “If the US economy goes into a severe recession, we can always stop what we are doing. And we can always — if we need to — reverse what we're doing, if we think inflation is going downhill too quickly.” "For me, the cap on such a change is very high because we haven't yet seen a lot of evidence that core inflation - service inflation, wage inflation, the labor market - this is going down," he added.
For its part, the Federal Reserve raised the US interest rate by three percentage points this year in an attempt to bring down the highest rate of inflation in four decades. Investors are now expecting Federal Reserve officials to increase the rate by another three-quarters of a percentage point for the fourth consecutive meeting when they next meet on November 1 and 2 to determine policy, according to futures.
Most recently, the Labor Department's monthly report on employment and wages published on October 7 showed that the nation's unemployment rate fell to 3.5% in September, indicating that the Fed's rate increases so far have not had a significant impact on the labor market. Another monthly Labor Department report on consumer prices, due to be released on Thursday, is expected to show so-called core inflation, which excludes volatile food and energy prices, which accelerated in the 12 months through September.
While stressing the Fed's commitment to curbing inflation, the Minneapolis Fed chief also offered an explanation for why the central bank isn't moving faster than it already is. “If we just go up 2%, 3%, or 4% in one shot, that could be too much, and we end up exaggerating it unnecessarily,” Kashkari said. And “so, by moving the data around and looking at it and seeing how the economy is responding, it allows us to try to scale the dose somewhat, while still moving aggressively.”
Today's XAU/USD Gold Price Forecast:
According to the performance on the daily chart below, the price of gold XAU/USD is moving in a neutral position, waiting for a stimulus to determine the direction.
- The bears will have stronger control in case the prices move towards the support levels of 1658 and 1640 dollars, respectively.
- From the last level it is better to think about buying the currency pair.
- On the other hand, there will be no breach of the current downtrend without breaking the $1700 resistance level again.
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