Gold Looks for Footing as US Inflation Moves Higher

Gold prices have recovered in Tuesday’s North American session, after losing ground earlier in the day. Currently, the spot price for an ounce of gold is $1278.73, up 0.03% on the day. On the release front, inflation indicators were stronger than expected. PPI gained 0.4%, above the estimate of 0.1%, while Core PPI also came in at 0.4%, beating the forecast of 0.2%. On Wednesday, consumer data will be the focus, as the US releases CPI and retail sales numbers.

US Producer Price Index reports were stronger than expected in October. Core PPI and PPI remained unchanged at 0.4%, beating their estimates. PPI increased at an annualized rate of 2.8%, its fastest gain since February 2012. Is inflation on the rise? We could get an answer as early as Wednesday, with the release of CPI and Core CPI reports. Inflation levels are being closely monitored by the Federal Reserve, as stronger inflation levels would likely result in a rate hike in early 2018. The markets are very bullish on higher rates, with a December hike priced in at 91% and a January raise priced in at 89%.

Investors are keeping close eye on developments with President Trump’s tax proposal. There are some differences in the House and Senate bills, with some Republicans opposed to eliminating federal deductions of state and local taxes. The Republicans hope to present Trump with a new tax code by the end of the year, but with Democrats putting up fierce resistance, it’s unclear whether the bill will have enough votes to get through Congress. If the proposal is successful, the resulting economic growth could lead to higher interest rates, which would hurt gold prices.

XAU/USD Fundamentals

Tuesday (November 14)

• 3:05 US FOMC Member Charles Evans Speaks
• 5:00 Fed Reserve Chair Janet Yellen Speaks
• 6:00 US NFIB Small Business Index. Estimate 104.2. Actual 103.8
• 8:30 US PPI. Estimate 0.1%. Actual 0.4%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.4%

Wednesday (November 15)

• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.0% 
• 8:30 US Empire State Manufacturing Index. Estimate 25.3

*All release times are GMT

*Key events are in bold

XAU/USD for Tuesday, November 14, 2017

XAU/USD November 14 at 12:00 EST

Open: 1278.41 High: 1282.52 Low: 1270.12 Close: 1278.73

XAU/USD Technical

• XAU/USD inched lower in the Asian session. The pair posted losses in the European session but has recovered in North American trade
• 1260 is providing support
• 1285 is the next resistance line
• Current range: 1260 to 1285

Further levels in both directions:

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

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement in the Tuesday session. Currently, long positions have a majority (71%), indicative of trader bias towards XAU/USD breaking out and moving to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.