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Gold – Focuses on geopolitics with disappointing US jobs data
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Spot gold traded at US$2,624 at MCX close, up about 0.55% on the day. The MCX gold contract for December rose nearly 0.30 percent to Rs 75,152 (LTP).
Gold rose after six consecutive days of losses due to disappointing weekly US jobless claims data, although expected data on US CPI inflation limited the rise and led to a volatile session.
Data summary
The much-awaited US CPI inflation data rose more than expected on all counts in September. Housing prices, the largest category among services, rose 0.2%, compared to an increase of 0.5% in August, while equivalent rents for owners increased 0.3%, below the previous month. However, excluding housing and energy, service prices rose 0.40%, the highest value since April. The mother CPI was 0.2 percent (0.1 percent forecast), the annual CPI was 2.4 percent (2.30 percent forecast), the core CPI was up 3.3 percent, the fastest pace since June, and beat estimates of 3.2 percent, while the main CPI mom came in at 0.30 percent (0.20 percent forecast). Initial claims increased from 33,000 to 258,000 in the week ending October 5, the highest since August 2023. Even continuing claims reached 1.86 million (forecast 1.83 million), above forecasts. Weekly employment data was disappointing; However, to some extent, hurricanes Helen and Milton may have been affected by radioactive fallout.
US Dollar Index and Yield
The US Dollar Index extended its rally for the ninth day in a row as it rose 0.07 percent to 103. US 10-year yields rose 3 basis points to 4.10 percent, while 2-year yields fell 0.6 percent to 3.99 percent. The 2-year yield is weak and will likely return above 4%.
Geopolitical clock
Israel's security cabinet will meet on Thursday night to discuss Israel's long-awaited response to Iran's missile attack. Meanwhile, Israel continues its operations in Lebanon and has reportedly launched attacks in central Beirut.
ETFs
Total known global gold ETF holdings at 83,521 Moz were slightly lower than last week's level of 83,540 MOz.
Next information
Current US data includes PPI (September) and University of Michigan sentiment (October preliminary) and University of Michigan inflation expectations.
Panorama
Spot Gold supports conflict in the Middle East; However, as Israel's response to the Iranian attack is still awaited, the search for safe haven is not strong enough to lead to significant progress. At the same time, the rising US dollar and falling bond prices remain a challenge for bulls. US inflation data and September's monthly employment report will give the Fed insight into its future rate cut decisions, as the Fed must tread carefully in its monetary policy decisions. If the ongoing war escalates, gold prices will rise sharply as the impact of the data will be limited, at least in the short term.
Heading into the weekend, it is advisable to buy dips and avoid large positions.
Support $2,600 (Rs. 74,500)/$2,575 (Rs. 73,800). Resistance is at $2,655 (Rs 76,000)/$2,675 (Rs 76,500).
(Disclaimer: Praveen Singh is Associate Vice President of Currencies and Fundamental Commodities at BNP Paribas Shares. The views expressed are his own.)
