13 Nov 2024

Gold prices experienced a slight rebound from a nearly two-month low reached on Tuesday.

The rise in US bond yields and a strong US dollar have limited gains for the non-yielding XAU/USD.

Market participants are now anticipating the upcoming US Consumer Price Index for new momentum.

Gold price (XAU/USD) is experiencing a modest recovery on Wednesday, appearing to have ended a three-day decline that brought it to its lowest point since September 20, around the $2,590-$2,589 range reached the previous day. The generally weaker sentiment in the equity markets is identified as a significant factor providing support to the safe-haven asset during the initial part of the European trading session. Nevertheless, any substantial upward movement seems unlikely due to the strength of the US Dollar (USD).

Expectations that US President-elect Donald Trump's proposed expansionary policies will stimulate inflation and restrict the Federal Reserve's (Fed) ability to implement aggressive interest rate cuts continue to bolster elevated US Treasury bond yields. This dynamic, in turn, helps the USD maintain its position near its highest level since early May, thereby placing downward pressure on the non-yielding gold. Additionally, traders appear hesitant to make bold moves and are opting to remain cautious ahead of the upcoming US consumer inflation data.

Gold prices are currently lacking bullish momentum in the face of a strengthening US Dollar, as investors eagerly anticipate the upcoming US Consumer Price Index (CPI) report.

On Tuesday, the US Dollar reached its highest point since early May, driven by optimism surrounding the proposed expansionary policies of President-elect Donald Trump. This development has caused gold prices to fall below the $2,600 threshold for the first time since September.

Additionally, the potential implementation of Trump's protectionist tariffs is expected to exert upward pressure on inflation, thereby constraining the Federal Reserve's ability to lower interest rates, which continues to support high US bond yields.

Richmond Fed President Tom Barkin remarked on Tuesday that while inflation may be stabilizing, the trajectory remains uncertain, with the core inflation measure at risk of remaining above the central bank's 2% target.

In a related comment, Minneapolis Fed President Neel Kashkari indicated that any unexpected rise in inflation leading up to the December FOMC monetary policy meeting could prompt the central bank to reconsider its stance on interest rate cuts.

The yield on the benchmark 10-year US government bond remains near a multi-month high, a level reached following Trump's election victory, as market expectations for aggressive interest rate cuts by the Fed diminish.

As USD bulls take a momentary pause, all eyes are on the forthcoming US consumer inflation data, which is anticipated to significantly influence market expectations regarding the Fed's future rate-cutting strategy and provide new momentum.

The headline Consumer Price Index (CPI) is projected to have increased by 0.2% in October and by 2.6% over the past year, up from 2.4% in the previous month, raising concerns about the Fed's capacity to continue reducing rates.