Gold moves sideways as traders await clues from US CPI, Fed rate meeting

US dollar holds near weakest level since June before next week’s key events

Gold barely moved this week as traders were waiting for the November US inflation figures and the Federal Reserve’s next rate meeting to gauge where the price of the precious metal may be headed.

Spot gold was at USD 1,793.99 at 11:00 GMT in London on Friday, 9 December, down 0.2% on the previous week’s close. Gold futures were at USD 1,805,75 on Friday morning, slipping 0.2% on the week. 

The gold price hovered around a four-month high that it reached after US monetary policymakers signalled that they   were prepared to raise rates less aggressively. 

The yellow metal also held close to the psychologically important USD 1,800 level, which has served as a resistance to further gains. The upside has been limited as traders want to see more evidence that US inflation is coming under control, paving the way for a more moderate Fed policy. 

The US government will release November inflation data on 13 December. The October annual inflation rate, released a month ago, was 7.7%. It was a better reading than economists had predicted.  

The Fed’s next rate decision is due a day later, on 14 December, with futures pricing predicting a 75% probability of a 50-basis point rate hike, according to the CME Group’s FedWatch Tool.

The Fed raised interest rates by 75 basis points in each of the last four meetings. The Fed’s target rate is now between 3.75% and 4.00%. 

Higher US interest rates increase the opportunity cost of holding gold, which pays no interest, compared with interest-bearing assets, such as the dollar and US Treasury notes. 

The US dollar is also moving sideways before next week’s key economic events. The dollar index (DXY), which tracks the value of the greenback against six of its major counterparts, was steady at 104.54 on Friday morning, close to its lowest level since June. 

The dollar has been under some pressure recently because US policymakers indicated a change was coming in their tightening campaign. US Federal Reserve chair Jerome Powell last week said a smaller rate increase may come as soon as the December Fed meeting as borrowing costs approach a level that is restrictive enough to bring inflation down. 

The gold price and the US dollar tend to move inversely, because a weaker US currency makes gold contracts, which are priced in dollars, cheaper in other currencies.

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