Gold Price Forecast: XAU/USD surge as US CPI cools. US Dollar weakens
- Gold prices climbed nearly 0.90% to $1963.70, reacting to a drop in US Treasury yields after a softer-than-anticipated US inflation report.
- October’s CPI in the US eases to 3.2%, below expectations, leading to a significant decrease in the US 10-year note yield and a 1.50% fall in the Dollar Index.
- Market focus shifts to upcoming US economic data, including PPI and Retail Sales, for further cues on the Federal Reserve’s policy direction.
Gold price climbs close to 0.90% on Tuesday after hitting a daily low of $1938.84 due to a plunge in US Treasury bond yields courtesy of a softer inflation report in the United States (US). That weighed on the Greenback, which so far has lost more than 1.50% of its value against a basket of currencies, hence the jump in the price of yellow metal. The XAU/USD is trading at $1963.70.
XAU/USD Nears $1964 Mark Amid Declining Treasury Yields and Lower-than-Expected CPI Data
The US Bureau of Labor Statistics (BLS) reported that October’s inflation cooled more than expected. The Consumer Price Index (CPI) for the 12 months came in at 3.2%, down from the previous reading of 3.7%. Additionally, the monthly CPI figure was 0%, below the 0.1% expected by most economists.
Furthermore, the report indicated that core CPI, which excludes volatile items and is often considered a more stable measure of inflation, decreased by a tenth of a percent. It fell from the prior month’s reading of 4.1% to 4%, missing estimates that had predicted it would remain at 4.1%.
The release of this data has caused a significant decline in the US 10-year benchmark note yield, which decreased by more than 18 basis points and is currently at 4.45%, levels not seen since September 22, 2023. Consequently, the US Dollar Index (DXY) dropped by more than 1.50%, falling to 104.13. This decline follows a daily high of 105.73.
Consequently, XAU/USD jumped from below $1940 toward the $1970.92 daily high before trimming some of its gains and stabilizing at around the current spot price. Nevertheless, upside risks remain as the 20-day moving average (DMA) lies at $1972.81, which, once breached, could open the door for further upside.
The US economic docket would feature the Producer Price Index (PPI), Retail Sales, the New York Fed Empire States Manufacturing Index, and Federal Reserve speakers.