Gold prices explore 1930 again, keeping an eye on the data storm this week

Monday (November 13) entered the European session, market sentiment was more positive, the dollar stabilized, gold prices hovered at nearly three-week lows, and the market is currently focused on US inflation data. Last week, Federal Reserve Chairperson Powell hit back at the market's bet to cut interest rates early, and investors will get clues about monetary policy from more data.

Gold prices hovered near three-week lows on Monday as the dollar strengthened and investors awaited U.S. inflation data for more clues on whether the Federal Reserve would keep interest rates unchanged or raise them.

After tumbling above $50 last week, spot gold is trading in a narrow range around $1,935, waiting for the next clue.

Gold prices fell 2.8% last week, their biggest weekly drop in more than a month, as hawkish comments from Federal Reserve Chairperson Jerome Powell discouraged interest rate cuts.

Nicholas Frappell, global head of institutional markets at ABC Refinery, said: "The focus is on whether the CPI data will cause the Fed to pause or raise interest rates. So I think the market was a bit sideways until the data came out."

The US consumer price index, due to be released on Tuesday, is expected to rise 0.3 per cent month-on-month in October and 4.1 per cent year-on-year, according to a survey. Both estimates are unchanged from September.

The dollar rose 0.1% against other currencies after hitting a one-week high in the previous session, making gold less attractive to holders of other currencies.

The dollar index, which measures the value of the greenback against other major currencies, edged stronger around 105.80 and held on to most of last week's gains.

Markets also digested news late on Friday that Moody's downgraded its outlook on the US credit rating to "negative", while the focus shifted to the US consumer price index released on Tuesday.

Federal Reserve policymakers, including Federal Reserve Chairperson Jerome Powell, signaled last week that the battle against inflation may not be over, prompting the market to scale back bets on a rate cut that had pushed up short-term Treasury yields and supported the dollar.

The dollar rose to 151.85 against the yen on Monday, its highest level since October 2022. Last week, the dollar rose about 1.4% against the yen in a single week, its biggest one-day gain in three months.

"The dollar has peaked and the US economy is slowing, but people will be waiting for confirmation," said Kit Juckes, strategist at Socie ́ te ́ Ge ́ ne ́ rale (601166).

Matt Simpson, senior market analyst at City Index, said that in addition to the data, more Federal Reserve officials will speak this week, and they may echo Powell and open the door to further rate hikes.

"Even if we see a softening in the CPI data, the Fed is likely to continue to dampen hopes of a rate cut because it is not in their interest to cut rates, let alone mention a rate cut while inflation remains above target," he said.

On Friday, holdings in the SPDR Gold Trust, the world's largest gold ETF, rose 0.10 per cent to 868.14 tonnes.

"In addition to geopolitical risk-driven haven demand and central bank purchases, the macroeconomic backdrop is shifting to support gold," ANZ analysts said in a note.

Analysts added: "The US monetary tightening cycle is nearing its end and the dollar has peaked. This could lead to US 10-year Treasury yields and dollar weakness, which will support investment demand for gold."

Gold jewellers in India sold well over the Diwali weekend, with the recent drop in prices driving consumer interest.

With gold prices soaring due to the war between Israel and Hamas in early October, jewellers fear buyers will be hesitant during the festive period. However, gold prices have retreated as the likelihood of an escalation in the conflict decreases in November. This could boost sales during the October-December period, which Indians consider an auspicious time to wear gold, and could help support global gold prices by limiting losses.

Surendra Mehta, national secretary of the Indian Bullion and Jewellery Association, said demand in India, the world's second-largest gold consumer, rose by 8 per cent on the first day of Diwali. Coins accounted for about a third of sales, with the rest being jewellery, he said. Ahead of Diwali, the All India Traders Federation expects sales to exceed 500 billion rupees ($6 billion), especially for gold, clothing and household goods.