Gold rose above 1,980 on Thursday, having a weekly rise of over 2%, boosted by declining inflation and indications of diminishing economic growth in the U.S. These factors have supported market beliefs that the Federal Reserve has completed its rate hiking cycle.
Possible effects for traders
This week’s data revealed that the U.S. Consumer Price Index remained unchanged in October, with the core rate rising below the forecast only by 0.2%. Additionally, Producer Price Index figures dropped to their lowest in three and a half years. Finally, U.S. Jobless Claims figures were higher than expected. The data proves the Federal Reserve’s inflation containment efforts to be effective. Thus, market participants don’t expect more rate increases from the U.S. central bank. Investors believe that the rate hiking cycle has ended, and the opportunity cost for gold, a non-yielding asset, has decreased.
XAUUSD was relatively flat during the Asian and early European trading sessions. Market participants now focus on the upcoming U.S. Building Permits report at 1:30 p.m. UTC. Lower-than-expected figures may push the gold price towards 2,000. However, XAUUSD may correct downwards if the numbers are higher than expected. ‘Spot gold may break a resistance at $1,989 per ounce and rise into a range of 1,999–2,003, driven by a wave 3’ said Reuters analyst Wang Tao.
