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Gold slips from three-month high on profit taking, hawkish Fed comments

Agnes Lovasz Agnes Lovasz 14/11/2022
Gold slips from three-month high on profit taking, hawkish Fed comments Gold slips from three-month high on profit taking, hawkish Fed comments
Gold slips from three-month high on profit taking, hawkish Fed comments Agnes Lovasz

Gold price rallied last week on prospect of less aggressive Fed after US inflation data   

The price of gold slipped from its highest level since August on Monday as traders sought to lock in profits and a top Federal Reserve official signalled that US policymakers aren’t softening their stance against inflation just yet. 

Spot gold fell 0.9% from the previous session to USD 1,756.18 per ounce at 11:00 am in London on Monday, 14th November. Bolstered by a report on US consumer prices, gold spot prices rose more than 4% last week, resulting in their best week since March this year.

Gold dropped and the dollar strengthened after Fed Governor Christopher Waller said on Sunday that the Fed may consider slowing the pace of rate increases at its December meeting, but that doesn’t mean that it’s “softening” fight against inflation. The US dollar, as measured by the US dollar index (DXY), rose 0.8% on Monday morning to 107.12. 

A report on US inflation on 10th November showed a slowing pace of price increases, fuelling speculation that the Fed will ease the scale of its interest-rate increases.  

US consumer prices rose 7.7% in October from the same month last year, compared with an 8.2% annual increase in September, the Labor Department said on Thursday. Economists had expected an increase of 8%. 


Source: ThinkTrader
Year-to-date spot gold price
 
 
The weaker-than-expected inflation print also sparked a sell-off in the US dollar last week, again supporting the gold price. The greenback (DXY) weakened more than 3% in the last two sessions. That makes gold contracts, priced in the US currency, more attractive to buy for the holders of other currencies. 

Higher US interest rates this year have been driving up safe-haven demand for the dollar, helping the DXY touch a 20-year high. This diminishes the safe-haven appeal of gold, which has no yield. 

Gold prices have been under pressure since the Fed began its rate hike campaign to fight the fastest inflation in more than 40 years.
  
The Fed has raised US interest rates in four large, 75-basis-point steps, to a range of 3.75% and 4.00% by early November. Rates were near zero at the beginning of the year.   

US monetary policy makers are expected to raise their target rate again in December, but at a smaller scale. Futures pricing now predicts an 85% probability of a 50-basis point rate hike at the Fed’s December policy meeting, according to the CME Group’s FedWatch Tool. 

The Fed beginning to moderate rate increases would lend support to the gold price. 

Is this the tipping point for the gold price or it will remain under pressure? Go long or go short on gold CFDs on our award-winning ThinkTrader platform with tight spreads and fast execution.

 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Carl Capolingua
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Carl Capolingua
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Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

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Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Lesego
Lesego Mthombothi
Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
Mahmoud Alkudsi
Mahmoud Alkudsi
Mahmoud is a market analyst with over a decade of experience in financial markets. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and has experience in providing guidance to all levels of traders.
Shawn
Shawn Lee
Shawn Lee has over eight years of experience in the financial market as a market analyst. Shawn provides market key insights and trade ideas through the market and technical analysis. He also held trader roles and guided traders in maximising one’s trading success.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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