Gold price consolidates as investors await US inflation data

• Gold price trades back-and-forth as the focus shifts to US inflation data.
• A persistent inflation report may prompt hawkish Fed bets.
• Various Fed policymakers are scheduled to speak today.

Gold price (XAU/USD) struggles to extend its recovery as investors remain anxious ahead of US inflation data for October, which will be published at 13:30 GMT. The precious metal consolidates with investors expected to wait until after the release before building fresh positions, as the inflation data will provide them with greater clarity about the monetary policy outlook.

Economists have projected a steady growth pace in the core Consumer Price Index (CPI) while the headline inflation is seen easing. A persistent US inflation report would prompt expectations of further policy-tightening by the Federal Reserve (Fed). The Fed is committed to bringing down inflation to 2% in a timely manner and it won’t hesitate to raise rates further if it thinks inflation has become entrenched.

Daily Digest Market Movers: Gold price trades directionless

• Gold price rebounds to near $1,945.00 but struggles to extend upside as investors remain cautious ahead of the US inflation data for October.
• The precious metal trades are in a tight range as investors are expected to build positions after the release of US consumer inflation figures, which will guide them about the Fed’s likely next interest rate action at its monetary policy meeting in December.
• The extent of persistence in US inflation would offer some clarity on whether Fed policymakers will advocate for raising interest rates further.
• Monthly headline CPI is expected to have slowed to a 0.1% rise in October, from a 0.4% in September. In the same timeframe, the core inflation is seen growing at a steady pace of 0.3%.
• On an annual basis, the headline inflation is forecast to have risen at a slower pace of 3.3% against a 3.7% reading in September. The core CPI is seen expanding at a steady pace of 4.1%.
• A stubborn US inflation report may reprice the expectations of one more interest rate increase from the Fed at its December monetary policy meeting or in the early start of 2024. 
• Greater US inflation would indicate that progress has slowed in bringing inflation down to the Fed’s 2% target, prompting the need for increasing interest rates further.
• As per the CME Group Fedwatch tool, traders see a 15% chance of the Fed raising interest rates by 25 basis points (bps) at the December meeting and a 25% chance at the monetary policy meeting in January 2024.
• The odds for further rate-tightening edged higher as Federal Reserve Chair Jerome Powell along with his colleagues remain unsure about whether current interest rates are adequate to bring down inflation to 2%.
• Jerome Powell warned that a failure to control inflation by the Fed would be a big mistake. Therefore, the central bank won’t hesitate to tighten monetary policy further.
• Apart from the US inflation data, speeches from Fed policymakers: Philip Jefferson, Michael Barr and Austan Goolsbee will be of utmost importance.
• The US Dollar Index (DXY) has been consolidating in a range of 105.40-106.00 during the three trading sessions prior to the US inflation report. 10-year US Treasury yields hover near 4.63%.
• This week, investors will also focus on the monthly US Retail Sales data for October. As per the consensus, consumer spending is forecast to have contracted by 0.3% against 0.7% growth in September.
• Meanwhile, with no significant escalation in Middle East tensions appeal for bullion has diminished. 

Technical Analysis: Gold price retraces 38.2%

Gold price is struck in a tight range ahead of the release of the US inflation data. The corrective move in the precious metal has been extended to near 38.2% Fibonacci retracement (plotted from October 6 low at $1,810.50 to October 27 high at $2,009.50) around $1,933.80. 

The near-term outlook for Gold has turned bearish as it is trading below the 20-day Exponential Moving Average (EMA) while the 50-EMA near $1,938.00 continues to offer support.