Gold prices (XAU/USD) have seen a slight increase during the Asian session on Friday, recuperating from the previous day's decline. Currently hovering just above the $1,870 mark, the precious metal is up by 0.10% for the day, despite some uncertainty in its upward trajectory. This rise can be attributed to a modest drop in US bond yields, which has weakened the US Dollar (USD) and provided some support to gold. Additionally, geopolitical tensions, such as the ongoing conflict between Israel and Hamas, are bolstering XAU/USD. However, the potential for a rate hike by the Federal Reserve in 2023 is limiting the extent of gold's gains.
Thursday's release of the US Bureau of Labor Statistics (BLS) data revealed that the headline US Consumer Price Index (CPI) rose by 0.4% in September, maintaining a yearly rate of 3.7%, in contrast to market expectations of a decrease to 3.6%. Meanwhile, the Core CPI, excluding food and energy prices, met estimates, declining to a 4.1% yearly rate in September, marking a 24-month low. This higher inflation rate above the Federal Reserve's 2% target hints at potential further tightening of monetary policy by the central bank, which has implications for gold prices.
The outlook for gold is intertwined with developments in US bond yields and the USD. The possibility of further interest rate hikes by the Federal Reserve may provide a tailwind to US bond yields and the USD, necessitating caution for those considering bullish positions in gold. However, the recent dovish comments from several Fed officials have fueled speculations that the rate-hiking cycle may be approaching its end. This, in turn, hampers any substantial rise in US bond yields and inhibits the USD from capitalizing on its previous recovery from a two-week low.
The mixed fundamentals surrounding gold underscore the need for strong follow-through buying before committing to a sustained recovery in XAU/USD. It is important to note that gold appears to be on track to register significant weekly gains for the first time in the past three weeks. Forex traders will be closely monitoring the preliminary Michigan Consumer Sentiment Index, set to be released during the early North American trading session, as it could provide further impetus for gold's movement.
In the Forex market, XAU/USD is currently priced at $1,871.28, showing a daily change of 0.14%. Key levels to watch include the previous daily high at $1,885.15 and the previous daily low at $1,867.95. In terms of moving averages, the daily 20-period simple moving average (SMA) stands at $1,877.98, the daily 50-period SMA at $1,901.59, the daily 100-period SMA at $1,923.42, and the daily 200-period SMA at $1,928.69. These technical indicators offer valuable insights to Forex traders who are navigating the dynamics of the gold market.