Fears that a higher-than-expected US CPI for September would hit gold hard and lead to big price falls, failed to materialise after markets took the news that inflation was still rising in their stride.
The latest data release showed that prices in the US are still climbing, particularly in the food and medical sector, and that the slowdown of the energy sector has not been enough to mitigate inflation growth.
At 8.2%, the September CPI reading was above expectations, and as such triggered a quick fall in stocks and a further strengthening of the dollar. But this initial decline was quickly followed by a remarkable rebound. The S&P 500, having plummeted below 3,500 points, jumped by almost 200 points, approaching the key level of 3,700, while the US dollar – after an initial appreciation – lost ground. The positive momentum continued onto the Asian equities market.
In this surprising scenario gold has been a trend follower, falling from $1,680 to $1,650, before recovering all the losses and coming back this morning almost to the starting point of $1,680.
From a technical point of view, gold has built two solid support zones at $1,650 and in the region of $1,620, around the low reached in late September.
Bullion now seems ready to consolidate, and there is a decent chance of further rebounds once markets better understand when the Federal Reserve’s rate hikes have peaked. The first resistance zone is now placed at $1,690, while a clear surpass of $1,730 would offer a stronger positive signal.
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