Easing U.S. Inflation Pushes Gold Higher
Gold rose above 1,980 on Thursday, having a weekly rise of over 2%, boosted by declining inflation and indications of diminishing economic growth in the U.S. These factors have supported market beliefs that the Federal Reserve has completed its rate hiking cycle.
This week's data revealed that the U.S. Consumer Price Index remained unchanged in October, with the core rate rising below the forecast only by 0.2%. Additionally, Producer Price Index figures dropped to their lowest in three and a half years. Finally, U.S. Jobless Claims figures were higher than expected. The data proves the Federal Reserve's inflation containment efforts to be effective. Thus, market participants don't expect more rate increases from the U.S. central bank. Investors believe that the rate hiking cycle has ended, and the opportunity cost for gold, a non-yielding asset, has decreased.
XAU/USD was relatively flat during the Asian and early European trading sessions. Market participants now focus on the upcoming U.S. Building Permits report at 1:30 p.m. UTC. Lower-than-expected figures may push the gold price towards 2,000. However, XAU/USD may correct downwards if the numbers are higher than expected. 'Spot gold may break a resistance at $1,989 per ounce and rise into a range of 1,999–2,003, driven by a wave 3' said Reuters analyst Wang Tao.
Hawkish BOE Policy May Support the British Pound
The British pound (GBP) declined by 0.1% on Thursday, even though U.S. Jobless Claims figures were higher than expected.
On Thursday, the US Dollar Index (DXY) declined slightly, weakened by the higher-than-anticipated weekly U.S. Jobless Claims. Also, the market believes the Federal Reserve (Fed) will be more dovish with the monetary policy from now on, so the US dollar is declining. Expectations of interest rate cuts by the U.S. central bank favor the British pound, as rate futures suggest that the Fed may begin to cut rates sooner than the Bank of England (BOE). The BOE's Deputy Governor, Dave Ramsden, said yesterday that the U.K. monetary policy must remain restrictive for a prolonged duration.
During the early European trading session, GBP/USD declined as the U.K. Retail Sales figures came out lower than anticipated. Today, traders should focus on the upcoming U.S. Building Permits report at 1:30 p.m. UTC. If the figures exceed expectations, GBP/USD may drop below 1.23400. Contrarily, lower-than-expected Building Permits numbers could sustain the current short-term upward trend in GBP/USD.