In Thursday evening trading, the spot gold prices shot more than 2% towards $1740.28 an ounce. Elsewhere, the gold futurex prices on Comex New York also rose by the same percentage to $1744.30.
The XAU/USD chart released some days ago also shows a 2.46% jump to $1748.61. For your information, that was the highest level since August 26.
The US inflation data or CPI data released yesterday night turned out to be lower than expectations. On a monthly basis, the CPI in that country held at 0.4%.
It means that the number was lower than expectations of a 0.6% increase. Core inflation (Core CPI) were also declining from 0.6% to 0.3% in October. In response to this inflation data, the Dollar subsided to a two-month low.
Dramatic Pressure Has Been Loosened
The situation above is like breathing of fresh air for traders to buy gold in droves. When the analysts see declining inflation data, then there will be expectations that the Fed will slow the their rate hike.
That opinion was said by David Meger as an analyst at High Ridge Futures. Therefore, we can argue that the dramatic pressure that the gold market has experienced in recent months has loosened.
Now, gold has the ability to move higher. In the past week, the prices of that commodity have rallied nearly 8%, preceded by the release of disappointing U.S. Unemployment data last week.
CME Watch has now posted a 71.5% forecast for a 50 basis point Fed rate hike in December. Not only the Dollar, bond yields also slipped in response to the change in the outlook.
Federal Reserve Rate Hike has an Essential Role
So far, the Federal Reserve rate hike is a major factor in the bullish pace of gold. The lower the Fed's expectations of a that hike, then there is an opportunity for gold to recover its attractiveness as a non-yielding asset.
According to Stephen Innes of SPI Asset Management, inflation that is starting to cool down could have started to lower concerns about high inflation.
That is why; the Fed may be more comfortable acting more calmly in raising interest rates. Elsewhere, the United States dollar still weak during the first quarter period.
That helped the EUR/USD reached their highest intraday at 1,0247. EUR and GBP increased although the market nuance isn’t good. They chase everything after left behind on Monday.
Market Participants Must be Careful Enough
There is not any catalysts that support their moderate increase. However, the EUR/USD pair is still at a level which has been known before. Market participants are now being more careful.
It is especially ahead of the America’s consumers price index release. That number will be an important role for every meeting made by Federal Reserve in the future.
Market participants lose their desire on USD after the CPI inflation data in America support a prediction that Federal Reserve will slow down their interest rate hike.
As we know that within two years some aspects have lifted dollar two it’s highest level in two decades. Those aspects are the fed rate hike, fluctuating market, and geopolitical uncertainty.
More Risky assets will be more Interesting
The situation like that makes market participants throw their dollars position and choose a more risky asset. The example is stock.
Slowing down core CPI data triggers a significant weakening of dollar. So far, USD was 3.3 percent weaker versus Japanese Yen. It was the biggest weakening since June 2016.
To the euro, dollar was 1.7% lower where that was also the biggest weakening since 4 of November. The index of USD was also weakening by 2.2 percent.
That was the worst position since 7 years lately. CPI was only 0.4% in October. Meanwhile, the economists predicted that it will be 0.6%.
