Spot gold closed with a gain of nearly 1% at $2657 on Friday; it was up roughly 0.20% on the week.
Data roundup
US CPI data (September) were hotter-than-expected on all the counts: CPI m-o-m came in at 0.2% (forecast 0.1%), whereas CPI y-o-y was noted at 2.4% (forecast 2.30%). Core CPI y-o-y rose by 3.3% (forecast 3.20%), fastest pace since June, whereas core CPI m-o-m came in at 0.30% (forecast 0.20%). Initial jobless claims increased by 33K to 258K in the week ended October 5, the highest since August 2023 as continuing claims at 1.86 million were higher than the forecast of 1.83 million. It is possible that hurricanes in the US might have negatively impacted the job data, so upcoming data will be sought for a clear picture.US data on Friday were hardly better: University of Michigan consumer sentiment unexpectedly fell to 68.90 (forecast 71) in October from 70.10 in September, the first fall in three months. In addition, inflation expectations rose to 2.90% over the next year, the first increase in five months and up from the 2.70% expected in September The PPI for final demand (September) m-o-m rose 0.2% (forecast 0.20%), while PPI ex food and energy y-o-y came in at 2.80% (forecast 2.60%) .PPI final demand m-o-m came in at 0% (forecast 0.10%) whereas PPI final demand at 1.80% was hotter than the forecast of 1.60%, though it was the smallest advance since February.
Upcoming data
Major US data on the deck next week include retail sales advance (September), Philadelphia business outlook (October), weekly job data, industrial production (September), NAHB housing market Index (October) and housing starts (September). China’s data docket is quite heavy as it includes PPI and CPI (September), trade balance (September), new home prices (September), GDP (3Q), retail sales (September), industrial production (September), property investment (September), residential property sales (September) and jobless rate (September). In addition, China’s finance minister will hold a press briefing on Saturday to give details of fiscal stimulus.
Geopolitics
Israel continues to contemplate its course of action to retaliate against Iran for the latter’s missile attack Security Cabinet meeting on Thursday was inconclusive. Meanwhile, Israel continues to strike at Hezbollah in Lebanon with air and ground assaults. The US has expressed its concerns about the Iran-Israel conflict pushing up energy prices and hurting the global economy. Israel-Hamas war continues in Gaza without any truce in sight.
The US Dollar Index and yields
The US Dollar Index has recovered sharply from the support line of 100 as stellar nonfarm payroll report and hotter-than-expected inflation numbers have reduced the odds of an aggressive Fed easing this year. The Index, after rallying for nine straight days, ended a tad lower on Friday; however, it was up around 0.40% on the week. The ten-year US yields, up one bps to 4.10% on Friday, were sharply up by around 3% on the week, whereas the two-year yields at 3.96% were up around 0.70% on the week.
ETF
Total known global ETF holdings stood at 83.434 Moz as on October 10, slightly lower than 83.54 Moz seen at the end of the week ending October 4.
Outlook
Gold is being driven by ETF inflows, safe haven demand and disappointing US data. The fact that the metal was up on the week despite higher US yields and a firmer US Dollar is quite positive for it. Next week is a busy week on data front. If geopolitical tensions remain largely contained, gold may slide in the beginning of the week. Still, dip buying continues to be the preferred strategy. Overall, it is trading in a range of $2600-$2685, which may continue to hold unless geopolitical tensions flare up. US retail sales data will be closely watched by traders.
Support is at $2640/$2625/$2600. Resistance is at $2675/$2685/$2700.
(The author is Associate Vice President, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas)
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