Gold Higher Again on Friday

Gold prices are ending the week firmly higher with the safe-haven asset on track to record 4 winning days out of 5 this week. Following heavy selling over the prior fortnight, gold prices bottomed out on Monday and have recovered well throughout the week with prices now back above the 1973.51 level. The move higher comes amidst a sharp shift in Fed expectations on the back of the latest US inflation report.

US Inflation Drops

On Tuesday, annualised October CPI was seen falling to 3.2% from 3.7% prior. With inflation continuing to fall steadily, traders quickly repriced their Fed rates outlook with no further tightening now seen this cycle. Instead, traders are beginning to price in initial Fed rate cuts over H1 next year with May 1st currently the favourite for a first cut.

Bullish Gold View

Fed commentary this week has been a little mixed. The general takeaway looks to be that it is still too early to declare victory on inflation, in the Fed’s eyes. However, traders seem to be dismissing this view, anticipating that no further tightening will be needed. As such, USD looks vulnerable to further downside near-term with gold prices likely to remain supported if this narrative remains intact.

Technical Views

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Gold

As the breakout above the bear channel continues, the rally in gold this week has seen the market breaking back above the 1973.51 level. With momentum studies turning bullish, the focus is on a further push higher while above this level, putting focus on the 2069.41 YTD highs next.

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