The gold market is regaining momentum, as prices surpass the 4,100 USD/ounce mark, in the context that investors have begun to assess the possibility of the US Federal Reserve (FED) cutting interest rates next month.
Despite the delay, many economic experts believe that the recently announced retail inflation (PPI) pressure is not large enough to force the Fed to change its policy easing roadmap.
According to the US Department of Labor, the PPPI for the whole month of September increased by 0.3% after falling 0.1% in August - in line with the market's previous forecast.
Over the past 12 months, the entire PPI has increased by 2.7%, in line with Wall Street's forecast.
The core PPI, which excludes energy and food, rose 0.1% in September, after falling 0.1% last month. This increase was slightly lower than the expectation of 0.2%, causing annual core manufacturing inflation to reach 2.6%, lower than the forecast of 2.7%.
Gold prices have maintained a steady increase since the beginning of the week, slightly supported after weaker-than-expected inflation data was released, although this data was considered " off-line" due to the US government's 43-day closure - the longest time in history.
According to analysts, the PPI is an early measure of inflation, because when input costs increase, businesses will gradually shift this cost to end consumers.
Mr. Naeem Aslam - Investment Director of Zaye Capital Markets - said the USD is under pressure as expectations of interest rate cuts increased.
Gold prices are taking full advantage of the current scenario: The US dollar weakens, while the story of long-term high interest rates is gradually losing its appeal, Aslam said.
At $4,137, the precious metal is regaining vitality; if it breaks above $4,150, gold prices could move up to $4,200 faster than expected. Shelter capital flows and falling yields are creating a clear "favorite wind" - the selling side is gradually running out of reasons to fight the trend" - Mr. Naeem Aslam shared.
According to the CME FedWatch tool tool, the market currently rates an 84% chance of the Fed cutting interest rates next month. However, many economists are still cautious, considering the decision to remain 50 50 50 until further data is available.
