Gold Back Below $1,700 as Markets Await Key US Inflation Data

Gold is starting a new week on a downward trend having fallen below $1,700 an ounce. Later in the week will bring the release of the latest US inflation figures as well as the minutes of last month’s Federal Open Market Committee.

Furthermore, there are a whole host of senior central bankers speaking over the course of the week, including Fed representatives Lael Brainard and Charles Evans later today, so there are lots of potential drivers for significant intraday price movements.

The broader outlook for gold remains one where central banks across the world look set on a course of a series of interest rate hikes to try and bring stubbornly high inflation back down towards their target figures. The impact of these ever-increasing rates has been to make gold a less desirable commodity to hold with its lack of yield making other interest-paying assets such as bonds more attractive in its place. 

Another high inflation figure out of the US later this week will only exacerbate the pressure on the Fed to keep on raising its benchmark rate aggressively. So far the US central bankers have been in union on the need to maintain their aggressive stance with Brainard and Evans speeches today scrutinized for any weakening of that resolve.

It is worth noting that the decline in the spot price over the course of the last few months has sparked physical buying interest from Asia, with import flows to China reaching a four-year high in August.

This increase in physical demand from buyers taking advantage of lower prices, allied to the general market jitteriness ensuring that risk-off remains an attractive option to plenty of investors, will provide a floor on gold’s price. However, as long as the central banks, particularly the Fed, keep up their hawkish stance, it is hard to see significant upside potential for gold.

Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. 

As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis