©Reuters.
Investing.com – After a marathon of gold gains and a dramatic dollar fall late last week as surprise inflation data delighted markets.
It seems that the Fed’s statements that markets are overreacting to inflation data and that there is still a long way to go before the tightening can be abandoned have given the dollar hope again.
Drops
Gold fell during these trading moments on Monday, the start of the week’s trading, by more than $11, or the equivalent of 0.7%, to levels as low as $1,757.99 an ounce.
On the other hand, futures contracts on the yellow metal have now fallen by more than 6 dollars an ounce, or 0.4%, to levels of 1761 dollars an ounce.
The dollar is going up
On the other hand, the declines in gold gave rise to the increases in the dollar, which jumped against a basket of major currencies within the range of 0.7, reaching levels close to 107 points.
Once again, the bond yield bounced higher, taking the 10-year yield 0.077 points to as high as 3.89% during these trading moments on Monday.
On the other hand, the dollar index, which measures the US currency against a basket of major currencies, fell by close of trading on Friday by about 1.6%, registering 106,449 points, approaching its largest weekly decline since March 2020.
what happened?
Gold prices rose at the close of trading on Friday, as the US currency fell, to etch weekly gains of about $93 an ounce.
This comes after US data pointing to a slowdown in inflation fueled hopes that the Federal Reserve would slow its large interest rate hikes.
And yesterday, Thursday 10 November, gold prices closed their trading with an increase of about 40 dollars, with the US currency declining.
The price rose by close of trading on Friday by 0.9%, or $15.70, to reach $1769.40 an ounce, and the spot delivery price was up about 0.5%, to reach $1764.35 an ounce.
On the week, gold prices posted gains of about 5.5%, or the equivalent of $92.80 an ounce, which is the biggest weekly increase in more than two years.
Inflation in America
Consumer prices in the US rose less than expected last October, suggesting that inflation was slowing and stoking hopes that the Federal Reserve would begin tapering its large rate hikes.
OCBCFX strategist Christopher Wong said, “The weaker-than-expected CPI reading supports a slower pace at the December Fed meeting.”
The OCBCFX strategist added: “This could translate into a resumption of the dollar’s downtrend, providing a window for gold to achieve a moderate recovery.”
Wong added that if the euphoria continues in the market, gold prices could rise further to reach the $1762-$1767 range in the near term.
Market participants now see a 71.5% chance of a 50bp rate hike at the December Fed meeting.
Federal Reserve Governor Christopher Waller said financial markets appear to have overreacted to weaker-than-expected October consumer inflation data last week.
The Fed chairman stressed that interest rates need to rise and stay high, describing the October CPI as just “one data point.”
Waller said, “We look forward to gradually moving to raise rates, and it’s probably going to be 50 basis points at the next meeting or the next subsequent meeting.” The Federal Reserve’s Waller added, “We still have a long way to go in raising rates.”
