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What our experts say

Week Ahead: Gold traders eye US inflation data next

Han Tan
Chief Market Analyst
05.11 @ 16:41 GMT
Han Tan

With the all-around solid US nonfarm payrolls still fresh in their memories, market participants worldwide are likely to train their sights on the upcoming US inflation prints amidst these other scheduled economic data releases and corporate events in the coming week:

Sunday, November 7

  • Daylight savings time ends in the US

Monday, November 8

  • EUR: ECB Chief Economist Philip Lane speeches
  • USD: Fed speak – Fed Vice Chair Richard Clarida
  • Tencent Music Entertainment Q3 earnings

Tuesday, November 9

  • USD: Fed speak – Fed Chair Jerome Powell, San Francisco Fed President Mary Daly, St. Louis Fed President James Bullard
  • GBP: BOE Governor Andrew Bailey speaks
  • CNH: PBOC Governor Yi Gang speaks
  • EUR: Germany September trade, November ZEW survey expectations
  • USD: US October PPI
  • DoorDash Q3 earnings
  • Coinbase Q3 earnings

Wednesday, November 10

  • CNH: China October CPI, PPI, FDI
  • USD: US October CPI
  • USD: US weekly initial jobless claims
  • US crude: EIA weekly US crude oil inventory report
  • Disney Q3 earnings

Thursday, November 11

  • China’s Singles Day sales bonanza – watch Alibaba, JD.com
  • JPY: Japan October PPI
  • EUR: European Commission publishes updated economic forecasts
  • GBP: UK 3Q GDP and external trade, September industrial production
  • US bond markets closed for Veterans Day

Friday, November 12

  • NZD: New Zealand October manufacturing PMI
  • EUR: Eurozone September industrial production
  • USD: US November consumer sentiment

At the time of writing, gold bulls are showing remarkable resilience even in the face of a stronger US dollar post-NFP. Moderating yields on 10-year US Treasuries are allowing bullion to launch another bid at the $1800 handle, despite the prospects of mid-2022 Fed rate hike.

Markets are forecasting that the October CPI grew by 5.8% compared to October 2020. Note that the Fed’s preferred inflation gauge already posted a year-on-year reading of 4.4% in September, far exceeding the Fed’s 2% target. Fed Chair Jerome Powell is sticking to his “transitory” view of inflation, but markets, and the data, suggest otherwise.

Hence, the dilemma that’s set to push and pull on spot gold prices.

Although gold is traditionally seen as a hedge against inflation, surging consumer prices also suggest that the Fed has to raise interest rates sooner, which leads to a stronger US dollar. Noting the typically inverse relationship between the greenback and bullion, one would expect the stronger dollar to keep suppressing the precious metal in the lead up to the eventual rates liftoff. Rising rates also are accompanied by rising yields, which could heap more downward pressure on the zero-yielding precious metal.

And so it remains to be seen whether the mid-week US inflation print point to inflationary pressures remaining stubborn or will it show signs of easing.

The inflation outlook, as it portends to the timing of the US rate hike, could sway gold prices in the days and months ahead

Disclaimer: This material is comprised of personal opinions and ideas. It should not be construed as an investment recommendation or a solicitation for any transaction. It does not imply any obligation to purchase investment services, nor does it guarantee or predict future performance. Exinity, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

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