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Gold – Up on disappointing US job data with geopolitics in focus
Performance
Spot gold at the time of the MCX closing was trading at $2624, up around 0.55 per cent on the day. The MCX December Gold contract at Rs 75,152 (LTP) was up nearly 0.30 per cent.
Gold rose after six consecutive days of losses as it gained on disappointing US weekly jobless claims data, though hotter-than-expected US CPI inflation data kept the upside limited and led to a volatile session.
Data round-up
The much-awaited US CPI inflation data rose more than forecast on all counts in September. Shelter prices, the largest category within services, increased 0.2 per cent from August's 0.5 per cent advance as owner's equivalent rent rose 0.3 per cent, decelerating from the prior month. However, excluding housing and energy, service price rose 0.40 per cent, the most since April. CPI m-o-m came in at 0.2 per cent (forecast 0.1 per cent), CPI y-o-y was noted at 2.4 per cent (forecast 2.30 per cent), core CPI rose by 3.3 per cent, fastest pace since June, and topped the estimate of 3.2 per cent, whereas core CPI m-o-m came in at 0.30 per cent (forecast 0.20 per cent). Initial claims increased by 33K to 258K in the week ended October 5, the highest since August 2023. Even continuing claims were higher than forecast rising to 1.86 million (forecast 1.83 million). The weekly job data were disappointing; however, to some extent, readings might have been impacted by disruptions due to hurricanes Helene and Milton.
US Dollar Index and yields
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The US Dollar Index extended its rally to the ninth straight day as it rose 0.07 per cent to 103. The ten-year US yields at 4.10 per cent were up by 3-bps, whereas the 2-year yields slid by 0.6 per cent to 3.99 per cent. The 2-year yields are vulnerable and are likely to move back above 4 per cent mark.
Geopolitical watch
Israel’s security cabinet was set to convene on Thursday evening to discuss Israel’s much-anticipated response to an Iranian missile attack. Meanwhile, Israel continues with its operations in Lebanon and has reportedly struck central Beirut.
ETF
Total known global gold ETF holdings at 83.521 Moz were slightly lower than the last week's level of 83.540MOz.
Total known global gold ETF holdings at 83.521 Moz were slightly lower than the last week's level of 83.540MOz.
Upcoming data
Today's US data include PPI (September) and University of Michigan sentiments (October preliminary) and University of Michigan inflation expectations.
Outlook
Spot gold continues to draw support from the Middle East conflict; however, as Israel’s response to Iranian attack is still awaited, the safe haven demand is not strong enough to lead to a meaningful advance. At the same time, rallying US Dollar and declining bond prices continue to pose a challenge to bulls. US inflation data and the September monthly job report will put the Fed in a fix on its future rate cut decisions as the Fed would need to tread carefully in deciding on its monetary policies. If the ongoing war flares up, gold will gain sharply as data impact will be limited at least in the short-term.
Going into the weekend, it is advisable to buy the dips and avoid large short positions.
Support is at $2600 (Rs 74,500)/$2575 (Rs 73,800). Resistance is at $2655 (Rs 76,000)/$2675 (Rs 76,500).
(Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Sharekhan by BNP Paribas. Views expressed are his own.)