Volkswacht Bodensee - Gold closes week near $4,165 as US inflation outlook pressures market

Gold ended the week near $4,165 an ounce after a modest rebound, while investors weighed US inflation data and the outlook for monetary policy.

Gold prices ended last week at around $4,165 an ounce, staging a limited recovery after a wave of declines took the precious metal close to $4,000, as investors awaited US economic data, especially on inflation and interest rates. In its weekly report released on Sunday, Kuwait’s Dar Al-Sabaek company stated gold’s recovery had not removed the pressure on the metal, as fears persist over US inflation and the possibility of tighter monetary policy in the coming months.

The report stated gold enters a new week amid continued uncertainty in global markets, with investors awaiting key US economic data to gauge the US Federal Reserve’s policy path. It stated gold is being driven by a mix of inflation, interest rates, the dollar and Treasury bond yields, along with geopolitical risks and stock market swings.

US consumer prices rose 3.7 percent year-on-year in September, compared with 3.4 percent in August, beating market expectations of 3.6 percent, the report stated. The producer price index also rose 3.6 percent year-on-year, above expectations. This reinforced fears of persistent inflationary pressure and of difficulty bringing inflation back to target in the near term.

Market bets on a Fed rate hike at its October meeting have declined, with investors’ attention shifting to the December meeting and the possibility of further steps against inflation if price pressures continue, it noted. The report stated this mixed picture reflects caution in the markets. Holding interest rates steady could support gold in the short term, while expectations of eventual hikes would limit the chances of lasting gains.

Geopolitical developments in the Middle East and the war in Ukraine remain key factors, with continued fears over the security of shipping lanes and global energy supplies, the report stated. Rising tensions could increase demand for gold as a hedge, but higher oil prices from supply disruptions could fuel inflation and push central banks to keep rates high for longer. Gold therefore faces mixed influences, with safe-haven demand on one side and the prospect of continued tight monetary policy on the other.

Markets are also watching technology and artificial intelligence (AI) stocks, as major companies report earnings, it stated. Weaker-than-expected results could hit investors’ risk appetite and boost demand for safe havens, while strong results could support equities and draw some flows away from gold.

In the week of Oct 19 to 23, investors will focus on US housing data, weekly jobless claims and preliminary purchasing managers’ index (PMI) readings, which will give early signals on the performance of the US manufacturing and services sectors. The report stated strong data would reinforce expectations of tighter monetary policy, supporting the dollar and bond yields and putting pressure on gold.

On the technical side, the report stated gold faces key resistance at $4,200 an ounce. A break above it could open the way to $4,242 and then $4,331, before $4,500 if buying momentum improves. Support lies at $4,150, then a stronger level at $4,100.

A break below that could lead gold to test $4,050 and then $4,000.

The report stated a sustained break above resistance would depend on a return of buying momentum, not just temporary gains during trading sessions. A pullback could be a buying opportunity, but further gains would need clearer support from the drivers behind gold, as expectations of monetary tightening remain one of the main challenges to lasting gains.

On the local market, the price of 24-carat gold stood at KD 42 per gram (about $136), while 22-carat gold was at KD 38.500 (about $124). A kilogram of silver sold for about KD 632 (about $2,050).

A.Zbinden--VB