Gold rises to $4,195 per ounce amid anticipation of US inflation data and interest rate trajectory
Kuwait City, Oct 11 (KUNA) -- Gold prices ended last week’s trading on an upward note at $4,195 per ounce, posting weekly gains following a wave of declines that had pushed prices to near $4,000 per ounce, as markets awaited U.S. inflation data and the trajectory of interest rates.
A report issued today by Kuwait Mint Company stated that gold’s recovery was supported by buying activity aimed at capitalizing on the price drop, alongside improved investment demand driven by lower U.S. Treasury yields during some sessions of the week and a relative decline in the U.S. dollar.
The report noted that investors continued to assess the likelihood of the Federal Reserve holding interest rates steady at its October meeting, as bets persisted on the possibility of another rate hike in December. It added that gold experienced volatile movements last week, facing selling pressure at the start of trading due to rising U.S. yields and renewed concerns about the persistence of tight monetary policy, before rebounding toward the end of the week.
The report stated that the precious metal rose more than 1.40 percent during Friday’s trading, after hitting its intraday low of around $4,130 per ounce, before approaching $4,207 and closing at approximately $4,195. It pointed out that this performance reflected a return of buying activity at lower levels, but instability above the $4,200 mark keeps the possibility of continued volatility alive in the coming period.
The report clarified that gold’s recovery coincided with the release of U.S. data showing a decline in consumer confidence, as the University of Michigan’s consumer sentiment index fell to 46.3 in October, down from 48.1 in the previous reading and below market expectations of 47.6. It added that this reading reflects growing pessimism among American households regarding economic conditions, which could affect consumer spending levels in the near future.
It noted that the data helped boost demand for gold as investors assessed the likelihood of a slowdown in the U.S. economy and its impact on the Federal Reserve’s decisions. The report added that this could lead the Fed to pause in its upcoming rate decisions, continuing to monitor labor market developments, energy prices, and new economic data.
It stated that the path of U.S. interest rates remains one of the key factors determining gold’s direction in the coming period, as market pricing indicates an approximately 81 percent probability of a rate hold at the October meeting, with rates expected to remain within the 3.75 to 4.00 percent range.
Conversely, markets still price in an approximately 81 percent probability of a 25-basis-point rate hike in December, according to data from last week’s trading.
The report noted that the minutes of the latest Federal Open Market Committee meeting revealed divergent views among officials regarding the monetary policy path, despite a general inclination to keep the option of a rate hike open if economic conditions warrant it. Some officials believe any additional increase could be a precautionary measure to address inflation risks, while others view it as the beginning of a new phase of monetary tightening.
It mentioned that rising U.S. Treasury yields remain one of the most significant pressure factors on the precious metal, as higher yields increase the opportunity cost of holding gold, which is a non-yielding asset.
The report clarified that although yields experienced a relative decline during some sessions of the week, their persistence at elevated levels reflects investors’ concerns regarding inflation, financing costs, and the trajectory of monetary policy. It added that the resurgence of yields toward the end of certain trading sessions capped gold’s gains, while their decline during other periods supported recovery attempts.
The report noted that the US dollar continued to influence the precious metal’s movement, as its relative weakness during part of Friday’s trading enhanced gold’s appeal to investors transacting in other currencies. It further stated that the dollar’s subsequent rise limited gains, underscoring gold’s ongoing sensitivity to any shifts in expectations for US interest rates and yields.
The report forecast that the relationship between the dollar and Treasury bond yields would remain among the key short-term determinants of gold’s direction, particularly as the release of US inflation data approaches, which could reshape market expectations regarding monetary policy. It highlighted that geopolitical developments in the Middle East remain a crucial factor in shaping global market trends, with ongoing concerns linked to tensions between the United States and Iran, as well as security risks in strategic maritime passages, including the Strait of Hormuz and the Bab el-Mandeb.
The report explained that the escalation of these risks could boost demand for gold as a hedge asset during periods of uncertainty, while also potentially impacting oil supplies and global trade flows. It added that energy price increases resulting from these developments could intensify inflationary pressures, prompting central banks to maintain higher interest rates for a longer period, which might limit gains in the precious metal.
It noted that under such conditions, gold could benefit from growing demand for hedging against inflation and economic risks; however, this support could wane if rising energy costs reinforce expectations of monetary tightening and push up real bond yields.
The report stated that investors’ attention during the current week, running from October 12 to 16, is focused on a range of important US economic data, led by the Consumer Price Index for September, alongside the Producer Price Index, retail sales, initial jobless claims, and industrial production figures. It added that these data points could influence global growth expectations and the performance of currencies and commodities, including gold, particularly if they signal continued economic slowdown or heightened inflationary pressures in major economies.
From a technical perspective, the report indicated that gold faces a key resistance level at $4,200 per ounce, which stands as a major barrier to further recovery. A breakout and sustained trading above this level could strengthen the chances of regaining upward momentum. It clarified that if this occurs, attention would likely shift to the $4,260 per ounce level, corresponding to the 100-day simple moving average, followed by $4,335 at the 50-day moving average, and then $4,500.
The report pointed out that technical indicators show limited improvement in buying momentum. However, the Relative Strength Index (RSI) remaining below the neutral 50-point level suggests that the downward trend has not entirely lost its influence, and that sustained recovery requires confirmation through a breakout above key resistance levels.
On the local front, the report stated that gold prices in the Kuwaiti market continue to be directly influenced by global ounce price movements, alongside fluctuations in the US dollar exchange rate and market expectations regarding the trajectory of US monetary policy.
He added that the price of a gram of 24-karat gold reached approximately 4.290 Kuwaiti dinars (about $137), while 22-karat gold was recorded at around 3.760 dinars (about $125). Meanwhile, the price of a kilogram of silver stood at roughly 671 dinars (about $2,177). (End) S.M.R. / H.T.
