In terms of economic data, the US Consumer Price Index (CPI) revealed a 0.4% month-on-month increase in headline inflation (3.7% year-on-year), higher than those in June and July. Core inflation rose by 0.3% month-on-month (4.1% year-on-year) in September, exhibiting its slowest pace of growth in nearly two years. Housing costs played a significant role in the overall price increase in September, with 2.4% contributing to the 3.7% rise. However, this increase is expected to ease over time, given the time lags in observed rents. Gasoline prices, after falling consistently for seven months, rose by 3% year-on-year in September, contributing to the gains in the headline CPI. Nevertheless, gasoline pump prices in the US have retreated from recent highs due to weak demand following the end of the summer driving season, indicating a potential decline in inflation in the coming months.
The minutes from the Federal Open Market Committee (FOMC) meeting were less hawkish than anticipated. These minutes from September indicate that Fed policymakers agreed to maintain a restrictive policy for some time. They also emphasized the need to balance the risks of overtightening against maintaining inflation on a path toward 2%. The minutes stressed that the committee should proceed with caution, making policy decisions based on data and the balance of risks. While a majority of Fed officials believed that one more rate increase would likely be appropriate, some argued that no further increases would be warranted. The likelihood of another Fed rate hike is diminishing, as policymakers see higher treasury yields as a tool to achieve a soft landing and tighten financial conditions.
The upcoming week will feature a series of speeches by Fed officials, including Fed Chair Jerome Powell, along with the release of US Retail Sales and Industrial Production data. Chinese GDP, fixed asset investment, and Retail Sales data are also expected to draw significant attention. With ongoing geopolitical tensions in the Middle East and fading prospects of another Fed rate hike, we anticipate that gold prices will remain well-supported in the short term.
Regarding price action, COMEX Gold has crossed above the 200-day Simple Moving Average (SMA), indicating strength on the part of the bulls. It is also in close proximity to the resistance of a falling channel, situated near $1968 per troy ounce. If the bulls manage to maintain a weekly closing price above $1968 per ounce, further upside potential may become evident, potentially propelling gold beyond the $2000 per troy ounce mark. Nevertheless, caution should be exercised, as the current premium in gold is largely driven by geopolitical tensions. Any resolution or de-escalation of these tensions could rapidly diminish the premium associated with gold.
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