Commodity Market: Gold heads for third week of gains, dollar hovers above 1-month low ahead of US PCE inflation data, Fed meeting

Spot Gold remained stuck within a narrow trading range on Friday ahead of the key US PCE inflation report. Still, the precious metal looked set to register its third consecutive week of gains, as the US Dollar hovered above a fresh one-month low and US 10-year Treasury yields were on track for their largest weekly drop in three months, thus, reducing the opportunity cost of holding bullion which pays no interest.

Expectations of interest rate hikes and reduction in monetary stimulus seemed to have put a lid on Gold, as market players now await the outcome of the Federal Reserve’s policy meeting next week and its response to inflationary pressure after the latest data prints showed US economic growth had decelerated in Q3.

“The baseline is that the Fed wants to be done tapering by mid-2022, but there’s the risk of a more hawkish Fed if it suggests it could be open to tapering faster, which should strengthen the dollar and weaken gold,” DailyFX currency strategist Ilya Spivak was quoted as saying by Reuters.

“Gold should see a slow grind lower towards $1,700 and possibly under it into year-end.”

As of 9:07 GMT on Friday Spot Gold was edging down 0.26% to trade at $1,794.12 per troy ounce, while moving within a daily range of $1,790.96-$1,801.26 per troy ounce.

The commodity looked set to register its third straight week of advance, while being up 0.10%. The precious metal has gained 2.04% so far in October, following a 3.13% loss in September.

Meanwhile, Gold futures for delivery in December were retreating 0.51% on the day to trade at $1,793.45 per troy ounce, while Silver futures for delivery in December were down 0.68% to trade at $23.957 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.11% to 93.462 on Friday. Yesterday the DXY slipped as low as 93.278, which has been its weakest level since September 27th (93.208).

In terms of macroeconomic data, today Gold traders will be paying attention to the September report on US personal income, personal spending and Core PCE inflation due out at 12:30 GMT as well as to the final data on US consumer sentiment for October due out at 14:00 GMT.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of October 29th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on November 2nd-3rd, or unchanged compared to October 28th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,800.58
R1 – $1,808.74
R2 – $1,818.66
R3 – $1,826.82
R4 – $1,834.98

S1 – $1,790.66
S2 – $1,782.50
S3 – $1,772.58
S4 – $1,762.65