The combination of a slightly weaker dollar and dip in global bond yields has again helped support gold prices and buyers were able to make a stronger impression with gains to the $1,270 area.
Although the headline US CPI reading was in line with expectations at a five-month high of 0.3% to give an annual increase of 1.5% from 1.1% previously, the core increase was slightly lower than expected at 0.1% with an annual increase of 2.2%.
There was no further increase in pressure on the Fed to tighten policy following the data and bond yields also moved lower. Although the dollar reaction was muted, there was a generally weaker US currency tone.
The combination of softer dollar and lower bond yields continued to provide net gold support as prices moved to test support above the $1,260 area with investors drawing support from the ability to hold above $1,250.
There was no major reaction to the latest Chinese GDP data, which was in line with expectations.
The dollar drifted weaker again on Wednesday with the trade-weighted index moving further away from the 98.00 level, while US Treasury prices maintained a slightly firmer tone.
A subdued US currency continued to support precious metals, and after edging higher during Wednesday’s Asian session, there was stronger support in Europe with expectations of strong demand out of India also helped underpin prices.
There were newswire reports from Japan on Wednesday that the Bank of Japan would not sanction additional monetary easing at the November policy meeting, which triggered a further dip in dollar support against the yen with USD/JPY below 103.50. The dollar dip helped trigger fresh gold demand with prices gaining sharply to the $1,270 area.
The US data releases are unlikely to have a major impact on Wednesday and the effect of the third US Presidential debate is likely to be theatrical rather than having a notable market impact, although there will be wariness over further potential leaks.
There will be some caution ahead of Thursday’s ECB policy meeting with Draghi’s press conference likely to have a significant impact on currencies and gold.
Gold Prices 4H Chart