Gold eying $1,787 ahead of Fed’s favored inflation reading

Gold price begins December on a firmer standing around $1,768, after posting the biggest monthly gains in 29 months during November. The precious metal’s latest run-up could be linked to the dovish messages by Fed Chair Jerome Powell, as well as optimism surrounding China.

Gold buyers are expected to take a breather ahead of the Fed’s preferred inflation gauge, namely the United States Core Personal Consumption Expenditure (PCE) Price Index for October.

Jerome Powell marked his first public appearance after November’s FOMC meeting while speaking at the Brookings Institute on the economic outlook, inflation and employment. Powell noted it makes sense to moderate the pace of interest rate increases while also suggesting that the time to slow the pace of rate hikes could come as soon as the next meeting in December.

Before Powell, Fed’s Lisa D. Cook also spoke and praised the inflation data to signal that the Fed would likely take smaller steps as it moves forward.

Following Powell’s speech, the markets were favoring a 50 basis points rate hike in December as bets increased from 69.9% ahead of the speech to above 75%.

The US Dollar Index also reacted by snapping a three-day uptrend while portraying the biggest daily loss in a week, not to forget the deepest monthly fall in 12 years. Wall Street benchmarks celebrated the dovish remarks by Powell while the United States 10-year Treasury bond yields reversed the early gains to end November on a negative footing around 3.61%.

Given the inverse relationship between the US Dollar and gold, the precious metal cheered the dollar’s slump by crossing the key technical hurdle and luring buyers.

In addition to the dovish comments by Powell, disappointing economic data also underpinned the Gold price rally the previous day.

To name some data; US ADP Employment Change gained major attention as it marked the lowest readings since January 2021 with a 127K figure for November versus 200K forecast and 239K previous readings. On the same line was the US JOLTS Job Openings for October that eased to 10.334M versus 10.3M expected and 10.687M prior. On the other hand, the second estimate of the US Gross Domestic Product (GDP) Annualized for the third quarter (Q3) marked 2.9% growth versus 2.6% initial forecasts.


China’s recent easing in the nation’s daily Covid infections favored the Gold Index. China reported just around 38,000 daily Coronavirus cases on Tuesday, conveyed on Wednesday, marking the second consecutive day of receding virus numbers after refreshing the record high.