Week Ahead: Gold’s presence above $1700 may depend on US inflation data

 

Markets have of late dared to revive bets over a “dovish pivot” by the Fed, which has helped gold prices recover back above $1700 this week.

However, whether such a recovery can be sustained over the immediate term may all boil down to the upcoming US inflation data release (and also the US jobs report due later today – Friday, October 7th).

 

For the week ahead, here are the key scheduled economic data releases and events that could move markets:

Monday, October 10

• USD: Speeches by Fed Vice Chair Lael Brainard and Chicago Fed President Charles Evans
• EUR: Speeches by ECB Chief Economist Philip Lane and Banco de Portugal Governor Mario Centeno

Tuesday, October 11

• JPY: Japan August trade balance and current account
• AUD: Australia September household spending and business confidence, October consumer confidence
• IMF publishes World Economic Outlook
• EUR: ECB Chief Economist Philip Lane speech
• GBP: BOE Governor Andrew Bailey speech, UK August 3-month unemployment rate, September jobless claims
• USD: Cleveland Fed President Loretta Mester speech
• Meta Platform’s virtual conference

Wednesday, October 12

• EUR: ECB President Christine Lagarde speech, Eurozone August industrial production
• GBP: UK August monthly GDP, industrial production, trade balance
• GBP: Speeches by BOE’s Jonathan Haskel, Catherine Mann, and Huw Pill
• Brent: OPEC publishes Monthly Oil Market Report
• USD: US September PPI, FOMC minutes, speeches by Fed Governor Michelle Bowman, Minneapolis Fed President Neel Kashkari

Thursday, October 13

• JPY: Japan September PPI
• AUD: Australia October consumer inflation expectations
• EUR: Germany September CPI (final)
• Brent: IEA publishes Oil Market Report
• US crude: EIA weekly oil inventory report
• USD: US September CPI, US weekly initial jobless claims

Friday, October 14

• NZD: New Zealand September manufacturing PMI
• CNH: China September CPI, PPI, external trade
• GBP: BOE due to end its emergency bond buying
• USD: US September retail sales, October consumer sentiment
• CAD: Canada August manufacturing sales, September existing home sales
• S&P 500: US earnings season begins with Wall Street banks (JPMorgan, Wells Fargo, Citigroup, Morgan Stanley)

 

At the time of writing, although gold has managed to clamber back above the psychologically-important $1700 mark, prices have been resisted at the 50-day simple moving average (SMA) and have since eased slightly.

 

And the next US inflation data, as measured by the consumer price index (CPI), could dictate gold’s next big move.

Markets are currently expecting the September headline US CPI to have risen by 8.1% compared to the same month last year (September 2021).

If so, that would mark a third consecutive month whereby the headline CPI figure has eased lower since June’s 9.1% - the highest CPI year-on-year print in over 40 years!

A lower-than-expected headline CPI print this coming Thursday may embolden the “dovish pivot” narrative (which is to say that markets expect the Fed to have less impetus to keep US interest rates higher for longer on signs that US inflation has peaked).

 

If so, that lower-than-8.1% CPI figure may help push gold even higher:

• If the 50-day SMA isn’t already breached in the immediate aftermath of today’s US jobs report, then that would be another key area of interest for bullion bulls.
   
• Markets are rather pessimistic about spot gold’s chances of hitting the psychological $1800 mark, allocating a mere 5.6% chance of such an event happening over the next one week.
   
• However, a shockingly-low CPI print may just do the trick for gold bulls (those hoping gold prices can keep marching higher).

 

A higher-than-8.1% CPI print on Thursday however may dash gold’s recent recovery:

• Gold may well falter back below $1700 (if it hasn’t already done so following today’s NFP print). However, markets are relatively cautious about such prospects (gold falling below $1700 over the next week), with such odds now standing at just 38%, given that the US jobs report remains a massive unknown.
   
• Immediate support may arrive around the $1680 mark (July low, also where spot gold’s 21-day SMA currently resides).
   
• Stronger support may arrive around the mid-$1600 region, as was the case around mid-September.

 

READ MORE: (September 15) Why is gold back below $1700?

 

Gold Bullion precious metal inflation CPI consumer price index Fed rate hikes dovish pivot