gold prices have surged and subsequently retreated, reflecting a shift in market sentiment. After reaching a peak of approximately $2,726 during Thursday’s Asian session, gold has fallen back, breaking its three-day upward trend. Investors are increasingly skeptical about a significant shift in Federal Reserve policy, especially given the stagnation in progress toward the inflation target of 2%. This expectation of a less dovish Fed has driven U.S. Treasury yields higher, enhancing the attractiveness of the U.S. dollar and leading to decreased demand for the non-yielding asset.
The overall positive market sentiment has also contributed to the decline in gold prices, as risk appetite grows among investors. As the price dipped closer to the $2,700 mark, market participants are processing the likelihood of a third consecutive rate cut by the Federal Reserve in the upcoming week. Despite the softening gold price, lingering geopolitical concerns — particularly due to the ongoing Russia-Ukraine conflict and tensions in the Middle East—continue to act as a buffer against larger price drops.
Recent U.S. consumer inflation data released reinforced the market’s expectations that the Federal Reserve will prioritize rate cuts at its next meeting. October’s Consumer Price Index data showed an increase of 0.3%, raising the annual inflation rate slightly from 2.6% to 2.7%. This data has heightened speculation regarding the Fed’s stance on monetary policy, contributing to a surge in U.S. bond yields that typically weighs down gold prices.
Despite current challenges, gold remains supported above the previous low of around $2,675. Technical indicators indicate some potential for rebound, with the Relative Strength Index suggesting that the metal is in a position for recovery, especially if it manages to maintain levels above the $2,700 threshold. Resistance levels to watch include the peak of $2,726, which could pave the way for further gains towards $2,748 and beyond if breached. Traders are keenly anticipating upcoming economic reports, including the U.S. Producer Price Index and jobless claims data, as they look to position themselves ahead of the Federal Reserve’s critical monetary policy meeting.
