Gold prices moved higher on Wednesday, led by speculative buying and a pause in the dollar’s rally, even as inflation data showed slower progress in easing inflationary pressures, suggesting fewer rate cuts until next year.
Gold rose 0.2% to $2,602.89 an ounce, recovering from a two-month low hit on Tuesday. U.S. gold futures gained 0.1 percent to $2,608.80.
US Consumer Price Index rose as expected in October. Progress toward reducing inflation has slowed since the middle of the year, which could lead to fewer rate cuts from the Federal Reserve next year.
“The market had become quite oversold as a result of the post-election sell-off. So I think there’s been some profit-taking and maybe some speculative buying at those levels,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
“The falling dollar is helping gold at this point. It seems that the inverse correlation has somehow re-expressed itself after the election.
Dollar and Fed
The US dollar lost 0.1%, holding below a recent 6.5-month high against other major currencies.
Investors believe a Trump presidency could force the Fed to halt its easing cycle if inflation picks up after expected new tariffs.
The Fed cut interest rates by 25 basis points last week. Traders are now assigning a 79% chance of a 25 basis point cut in December, up from 59% before the CPI data.
“In the short-term, there is a possibility that gold prices may recover slightly to around $2,650 per ounce, but may fall again thereafter,” said Zain Vawda, market analyst at MarketPulse by OANDA.
Silver was steady at $30.7 an ounce. Platinum was down 0.8% at $938 and palladium was down 0.8% at $936.56.
SOURCE: ot.gr
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1. What factors do you think are driving the recent increase in gold prices despite the slower progress in easing inflationary pressures and potential for fewer rate cuts next year?
2. How significant is the correlation between the gold price and the US dollar at this point in time? Has the dynamic between the two changed since the election?
3. What events or announcements could potentially impact the gold market moving forward, particularly regarding interest rate cuts and inflation?
4. Given that many investors are anticipating a Trump presidency to cause inflation, how do you see gold’s role in a portfolio changing in the long term?
5. Are there any other precious metals that you are watching closely given their performance relative to gold? What factors could impact their prices in the coming months?
