Gold is building on the previous rebound from one-week lows of $4,073, accelerating its recovery momentum beyond $4,100 in Asia on Thursday. The upswing is likely to continue ahead of the US Retail Sales and Producer Price Index (PPI) data.
Bloomberg’s China report rescues Gold buyers
Early Thursday, Gold has entirely reversed steep losses incurred following the release of hot US Consumer Price Index (CPI) report on Wednesday.
The US Labor Department’s Bureau of Labor Statistics said on Wednesday that annual core CPI rose 2.6% last month after climbing 2.4% in August, above market forecasts of +2.5%. Core CPI inflation steadied at 0.3% over the month in September, beating estimates of 0.2%.
The odds for an October Federal Reserve (Fed) interest rate hike jumped to 42% post-hot inflation data, up from about 22% before the release, according to the CME Group’s FedWatch Tool.
The shift in Fed expectations lifted the US Dollar (USD) and US Treasury bond yields across the curve, triggering a sharp sell-off in non-yielding Gold to the tune of about 1.5%.
However, Gold buyers appear to be rescued by a Bloomberg report released earlier, citing that China is quietly piling on US Treasuries through non-US custodians, inflating Canada’s holdings to nearly $600 billion.
Meanwhile, escalating Middle East conflict and artificial intelligence (AI) investments-led debt concerns boost safe-haven flows, aiding Gold’s recovery.
Further, no urgency on rate hikes shown by some of the Fed officials recently helps push back against expectations of an imminent rate lift-off, supporting Gold optimists.
Looking ahead, it remains to be seen whether Gold sustains the rebound once again from sub-$4.100 levels as the US Retail Sales and PPI inflation data could offer fresh clues on the Fed’s rate hike path.
Also, traders may turn cautious and refrain from placing fresh bets on Gold ahead of Fed Chairman Kevin Warsh’s appearance on Friday.
Warsh is scheduled to participate in a conversation with IMF Managing Director Kristalina Georgieva at the Fireside Chat with International Monetary Fund Managing Director Kristalina Georgieva in Bangkok, Thailand.
It will be Warsh’s last public appearance before the Fed enters the ‘blackout period’ on Saturday, ahead of the October 27-28 monetary policy meeting.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,145.23, keeping a bearish near-term tone as spot holds below all major simple moving averages (SMAs). The 21-day SMA at $4,208.09, the 100-day SMA at $4,245.61 and the 50-day SMA near $4,334.44 align overhead as a layered resistance band, while the 200-day SMA at $4,523.59 reinforces the idea of a broader topside cap. The Relative Strength Index (14) around 43.12 sits in neutral-to-soft territory, hinting that downside pressure persists but without outright oversold conditions.
On the downside, initial structural support is seen toward the broken upward trend-line zone, with the break level at $4,002.10 followed by its origin near $3,990.07. On the topside, bulls would need to reclaim the 21-day SMA at $4,208.09 first, before challenging the 100-day SMA at $4,245.61; a sustained move above these would open the way toward the denser resistance around the 50-day SMA at $4,334.44, while only a recovery above the 200-day SMA at $4,523.59 would significantly weaken the prevailing bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US CPI surprise seen complicating but not derailing Fed October skip
According to TD Securities, the stronger-than-expected US CPI print has materially complicated the Fed’s near-term policy calculus. From a policy standpoint, the bank notes that “Wednesday’s report makes the Fed’s calculus for October more complicated following recent clear guidance about skipping a hike at the next meeting — we are now tracking a solid 0.36% m/m gain for core PCE.” In their view, “Fed leadership appears to have decided to execute a gradual tightening cycle on the back of market pricing, through with the notable broad-based rise in yields partly doing some of the tightening for them.”
Despite the upside surprise in inflation, TD Securities stresses that “we are still of the view that October will be a skip based on that pre-CPI guidance. And we continue to look for 75bps of total tightening.” That said, they concede that “it is certainly a closer call after today’s CPI data,” as the latest figures raise the stakes around the Fed’s planned path of gradual tightening.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
