- Traders are expecting crucial US CPI, PPI, and sales numbers this week.
- Analysts forecast an acceleration in the headline CPI figure from 3.4% to 3.6%.
- The Houthis attacked a building belonging to Saudi Arabia’s oil company, Saudi Aramco.
Gold prices remained range-bound ahead of crucial US data on inflation and retail sales. Traders remained cautious, as these numbers will shape the outlook for the October Fed meeting. At the same time, focus remained on the conflict between the Houthis and Saudi Arabia, which intensified, sending oil prices higher.
Spot gold (Source: Bloomberg)
Gold has remained in consolidation this month after collapsing amid high yields and rate-hike expectations. The pause came as market participants moved from pricing two more hikes this year to just one. Downbeat employment data and a pause in the fighting between the US and Iran eased pressure on the Fed to hike rates.
However, the US is set to release more data before the October policy meeting that could change this outlook. Traders are expecting CPI, PPI, and sales numbers this week. Analysts forecast an acceleration in the headline CPI figure from 3.4% to 3.6%. Meanwhile, the monthly number could come in at 0.6% from 0.4% in the previous month. Meanwhile, they expect consumer spending to drop in September.
Hot inflation and sales numbers will increase the likelihood of a hike at this month’s meeting. Such an outcome would be bearish for gold, which tends to suffer when borrowing costs rise. The opportunity cost of holding the non-yielding metal goes up. The reverse is also true.
“If upcoming consumer price index data, producer price index data and retail sales data point to weaker economic momentum, markets may scale back expectations for further Fed rate hikes this year, providing a bullish catalyst for gold,” said Ilya Spivak, head of global macro at Tastylive.
Elsewhere, oil prices soared on Wednesday after reports indicated an escalation in the conflict between the Houthis and Saudi Arabia. The militant group attacked a building belonging to Saudi Arabia’s oil company, Saudi Aramco. The group has also attacked tankers and airports in recent days, causing destruction and death.
Furthermore, market participants expect the conflict between the US and Iran to resume after the November midterm elections. Therefore, oil prices could remain elevated, keeping inflation concerns alive. This means gold prices will struggle to gain. Instead, the downtrend could continue.
