Gold is back above the $4,100 mark, kicking off a big week on Monday with a strong rebound. However, it remains to be seen whether the bright metal sustains another attempt above that level ahead of critical US Consumer Price Index (CPI) data due on Tuesday.
Gold looks north (for now)
Gold has reversed losses incurred on Friday after the blockbuster US labor market report, which showed that Nonfarm Payrolls (NFP) increased 165,000 in October, blowing past expectations for a 65,000 gain, while the Unemployment Rate fell to 4.1%.
The US Dollar (USD) jumped alongside the US Treasury yields as the robust US employment data ramped up the odds for a December Federal Reserve (Fed) interest rate hike to about 80%, where it now wavers, according to the CME Group’s FedWatch Tool.
However, in Monday’s trading so far, the Greenback is retreating as reduced US-Iran geopolitical tensions drag Oil prices lower and ease inflation concerns. US President Donald Trump said on Sunday that he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progress.
Additionally, renewed US-China trade optimism provides the much-needed lift to the markets, weighing on the USD while aiding the Gold price recovery.
China’s Finance Ministry said on Monday that it will extend the suspension of an additional 24% tariff on imports from the United States (US) for two months, effective November 10, building on the truce between the two countries.
“Separately, gold demand in India picked up at the start of a key festival on Friday as prices slid to a seven-month low, drawing back bargain hunters who stayed on the sidelines for months waiting for a correction,” per Reuters.
Despite the impressive bounce in Gold, traders remain sceptical ahead of the US inflation release, which could check further recovery.
A surprise uptick in the underlying US CPI inflation numbers could seal in a December Fed rate hike, reviving the bearish sentiment around Gold. Higher rates increase the opportunity cost of holding non-yielding assets such as bullion.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,121.77, keeping a capped tone as spot holds below the medium- and long-term moving averages. The 50-day simple moving average (SMA) at $4,191.19 and the 100-day SMA at $4,201.38 both sit overhead, suggesting that rallies remain vulnerable while the broader trend stays under the 200-day SMA near $4,458.02. The 14-day Relative Strength Index around 52 hints at mildly improving momentum, but with price still below these key averages, bullish attempts are constrained.
On the topside, initial resistance is seen at the 50-day SMA at $4,191.19, followed by the 100-day SMA at $4,201.38, with the 200-day SMA at $4,458.02 reinforcing a higher structural barrier. On the downside, immediate support is offered by the 21-day SMA around $4,069.59, and a daily close below this level would likely open the way for a deeper pullback despite the currently neutral-to-positive RSI profile.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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