Gold price (XAU/USD) trades in positive territory during the early Asian session on Monday. The consolidation of the US Dollar (USD) lends some support to the precious metal. However, the higher US Treasury bond yield might cap gold's upside in the next session. At press time, the gold price is trading around $1,940, up 0.22% on the day.
On Friday, Federal Reserve (Fed) Bank of San Francisco President Mary Daly said she is not ready to say yet whether the central bank is done raising its interest rate cycle to bring inflation back to 2%. While, Fed Chair Jerome Powell stated that if it becomes appropriate to tighten policy further, Fed will not hesitate to do so. Traders will take more cues from the key data this week, including the US Consumer Price Index (CPI). The stronger-than-expected data might raise the odds that Fed to hike the rate again in its December meeting. It's worth noting that rising interest rates raise the opportunity cost of investing in non-yielding assets, implying a negative outlook for precious metals.
Furthermore, concern over economic growth in China might drag the gold price lower as China is the world's largest gold producer and consumer. Last week, the Chinese CPI dropped 0.2% in October from the previous reading of 0%. This week’s Chinese Retail Sales and Industrial Production will be released and these data could offer some hints about China’s economic condition.
The key event will be the US Consumer Price Index (CPI) on Tuesday. The monthly CPI reading is expected to ease to 0.1% in October while the core CPI is estimated to remain unchanged at 0.3%. These events could give a clear direction to the gold price.
Federal Reserve (Fed) Bank of San Francisco President Mary Daly spoke on Friday with CNBC that she is not ready to say yet whether the Fed is done raising its interest rate target to bring inflation back to 2%.
“The monetary policy is in a very good place.”
“Risk of over tighten and under tightening are balanced.”
“You can be significantly restrictive, which I think we are, and you can still not be sure if you’re sufficiently restrictive”
“There’s a lot of demand for certainty that we would say we’re done or we’re definitely hiking, but the truth is, we don’t know,”
“It is far too early to declare a victory.”
“Not ready to say what that next move will be.”
“Need to watch data to drive next rate decision.”
“Should not be surprised about the volatility in the bond market amid uncertain outlook.”
“Financial conditions are tighter than they were, they are remaining tight which is helping to bring balance back to the economy.”
The comments above have little to no impact on the US Dollar. The US Dollar Index (DXY) is trading lower on the day at 105.78, as of writing.
The AUD/USD pair remains under selling pressure during the early Asian session on Monday. The concern over economic growth in China weighs on the Australian Dollar (AUD) and the higher US Treasury bond yields lift the US Dollar (USD) higher. The pair currently trades near 0.6355, losing 0.07% on the day.
The preliminary US University of Michigan Consumer Sentiment data for November fell to 60.4 from 63.8 in the previous month, the lowest reading this year. Meanwhile, the 1-year inflation expectations rose to 4.4% from 4.2% and the 5-year rose to 3.2%, its highest reading in 11 years.
The markets see a low chance of the Federal Reserve (Fed) raising interest rates again in its December meeting. According to the CME FedWatch Tools, the odds for rate hikes in December dropped to 14.4%. However, Fed Chair Jerome Powell stated that they will not hesitate to raise rates again if it’s necessary. The key economic data this week, including the US Consumer Price Index (CPI) might offer hints about monetary policy guidance.
On the Aussie front, the Reserve Bank of Australia (RBA) released its Monetary Policy Statement (MPS) on Friday, indicating the nation’s inflation has passed its peak, but it remains considerably high and is proving to be more persistent than expected a few months ago. The RBA will bring inflation back to target, but the upcoming data will determine whether additional monetary policy tightening is required.
Looking ahead, market players will monitor the Australian Westpac Consumer Confidence for November on Tuesday. The US Consumer Price Index (CPI) will be a closely watched event by traders. The monthly CPI figure is expected to ease to 0.1% in October from 0.4% in the previous reading, while the core CPI is estimated to remain at 0.3%.
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