Gold Punches Past $1300 as CPI Misses Estimate

Gold prices have posted gains in Friday’s North American session. Currently, the spot price for an ounce of gold is $1300.97, up 0.57% on the day. On the release front, CPI gained 0.5%, short of the estimate of 0.6%. Core CPI posted a small gain of 0.1%, shy of the forecast of 0.2%. Retail sales data was a mix, as Core Retail Sales gained 1.0%, above the estimate of 0.9%. However, retail sales were up 1.6%, short of the forecast of 1.7%. Later in the day, we’ll get a look at UoM Consumer Confidence, which is expected to improve to edge lower to 95.1 points.

A strong US economy hasn’t led to higher inflation, and there was some disappointment in the markets as CPI and Core CPI narrowly missed their estimates. This has pushed gold prices higher in the North American session. Gold has climbed above the symbolic $1300 level for the first time since September 26, taking advantage of the negative market sentiment. With inflation an important consideration in future rate decisions by the Federal Reserve, investors will be anxiously monitoring how Fed policymakers respond to September’s soft inflation numbers.

The markets remain very optimistic that a December rate hike is on the way, and this sentiment hasn’t changed after the release of the Federal Reserve minutes earlier this week. The minutes indicated that many policymakers felt that a December hike “was likely to be warranted”. However, some policymakers remain concerned about low inflation levels and said that inflation would be a consideration in their decision on a rate hike. The odds of a December hike have increased dramatically in the past few weeks, mostly in response to Fed Chair Yellen and other FOMC members expressing optimism that inflation will move upwards. On Wednesday, Kansas City Fed President Esther George went event further, saying that low inflation did not pose a problem, as the US economy was strong and the labor market was at full capacity. Currently, fed futures have priced in a December hike at 87 percent.

XAU/USD Fundamentals

Friday (October 13)

• 8:30 US CPI. Estimate 0.6%. Actual 0.5%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1% 
• 8:30 US Core Retail Sales. Estimate 0.9%. Actual 1.0% 
• 8:30 US Retail Sales. Estimate 1.7%. Actual 1.6%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.1
• 10:00 US Business Inventories. Estimate 0.7%
• 10:00 US Preliminary UoM Inflation Expectations
• Day 1 – IMF Meetings
• 10:25 US FOMC Member Charles Evans Speaks
• 10:25 US FOMC Member Robert Kaplan Speaks
• Tentative – US Federal Budget Balance. Estimate -1.0B

*All release times are GMT

*Key events are in bold

XAU/USD for Friday, October 13, 2017

XAU/USD October 13 at 8:45 EST

Open: 1293.54 High: 1302.55 Low: 1291.08 Close: 1300.97

XAU/USD Technical

• XAU/USD edged higher in the Asian session but gave up these gains in European trade. The pair has posted considerable gains in the North American session
• 1285 is providing support
• 1307 is the next resistance line
• Current range: 1285 to 1307

Further levels in both directions:

• Below: 1285, 1260, 1240 and 1213
• Above: 1307, 1337 and 1367

OANDA’s Open Positions Ratio

XAU/USD ratio has shown little movement this week. Currently, long positions have a majority (68%), indicative of trader bias towards XAU/USD continuing to move to higher ground.

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