Gold prices rose to a two-week high on Friday of nearly US$1,890 an ounce, driven by expectations that the Fed will not raise interest rates at its upcoming policy meeting on November 1.
The increase came a day after a new consumer price index (CPI) report showed that core inflation slowed in September.
Gold Prices Near US$1,900 per Ounce Hopes that the Fed Will Skip Another Interest Rate Hike
Gold prices recovered quickly this week, especially after a spike on Thursday (12/10/2023) due to a new CPI report showing that September headline inflation exceeded expectations while core inflation slowed.
Investors flocked to gold after the new inflation data raised hopes that the Fed would skip raising interest rates at its upcoming monetary policy meeting in November, quoted from Tokenist.
This, along with rising tensions in the Middle East, pushed traders to safe investment assets, including the yellow metal.
Thus, the price of gold jumped from almost US$1,800 per ounce to almost US$1,890 on Friday (13/10/2023).
Price action is currently testing critical intraweek resistance around US$1,890, marked by previous support breaking in late September.
A breakout of this level would pave the way for a quick push to US$1,920, where there is a mix of the 100-day moving average (DMA) and 200 DMA. On the downside, the 100 weekly moving average (WMA) provides support near US$1,860.
Persistent Inflation and a Hot Labor Market Unlikely to Trigger Another Rate Hike in November
The latest rally in gold prices accelerated after the September CPI report, which showed the annual inflation rate reached 3.7 percent last month. This figure was higher than economists' expectations of 3.6 percent and unchanged from August's reading.
Core inflation, which does not take into account energy and food costs, was reported at 4.1 percent, in line with consensus estimates and down from the previous 4.3 percent. On a monthly basis, core CPI rose by 0.3 percent, also in line with projections.
Last week, the non-farm payroll (NFP) report revealed that the US economy added 337,000 jobs in September, double the consensus estimate.
The data shows that the US labor market remains strong even though the Fed has imposed a number of interest rate hikes in the past year and a half.
If this applies, the price of gold is expected to remain as it is now or even rise to the next level.
Nevertheless, even though the latest wave of economic data shows persistent inflation, it is unlikely to influence the US central bank to impose another quarter-point increase at its November policy meeting.
In contrast, the Fed has previously signaled plans to keep interest rates ‘higher for longer’ – a message that has significantly contributed to the recent bond market turmoil.
