Gold price today: Trading strategy for yellow metal ahead of China stimulus

Although the US yields fell due to oil prices,  downside move in the yields may not last long, given the September US CPI, PPI, non-farm payroll report and ISM services data.

According to a Bloomberg Survey, the PCE price Index, the Fed’s preferred inflation metric, is expected to rise an annualised 2.2 per cent, slightly above the Fed’s target of 2 per cent, on average over the next four years whether Kamala Harris or Donald Trump win the Presidential election.

Spot gold was trading at $2,663, up nearly 0.50 per cent for the day, while the MCX December contract at Rs 76,385 (LTP) was up 0.45 per cent.

Central Bank watch:

In a panel discussion at the 2024 LBMA Precious Metals Conference, central bank officials of Mexico, Mongolia, and Czechoslovakia agreed that gold’s role as a reserve asset in global foreign reserves will continue to grow. They also dwelled on gold’s role as an alternative global reserve currency. 

Marek Sestak, deputy executive director of the Risk Management Department at the Czech National Bank, said that the Bank intends to increase its gold holdings to 100 tonnes. Presently, the Czech gold holdings stand at 44.80 tonnes.

Gold ETF:

Total known global gold ETF holdings stood at 83.462 Moz as of October 14, slightly above last week’s level of 83.424 Moz. Holdings fell for the first-time last week after eight straight weekly inflows.

Upcoming data and events:

Today’s US data releases on tap include import and export price Indices (September). However, Thursday’s data that include retail sales advance, Philadelphia Fed Business Outlook, initial jobless claims, industrial production, and NAHB housing market Index will be more important. The UK’s CPI inflation is also slated to be released today.

China’s housing minister will hold a press briefing on Thursday. It is expected that he may provide more details of economic stimulus to support the nation’s property sector and boost the economic growth.

The ECB’s monetary policy meeting will be held on October 17. The Central Bank is expected to cut rates by 25 bps as inflation has below the Bank’s target and economy is struggling. The Eurozone’s CPI (September final) will also be released on the same day.

Fedspeak:

The Fed’s Governor Christopher Waller said that the Fed needs to cautious in cutting rates as the September CPI report was not good while the nonfarm payroll report was strong.

Federal Reserve (Fed) Bank of San Francisco President Mary Daly said on Tuesday that it was likely the Fed will only see one or two more rate cuts in 2024.

Outlook:

Geopolitical concerns have subsided to some extent as Israel is expected to refrain from attacking Iranian oil and nuclear facilities, which is negative for gold prices. At the same time, the downside move in the US yields is unlikely to become a new trend as the US CPI data were hotter-than-expected and key macroeconomic data like GDP, job report and ISM services have surprised on the upside. If China’s stimulus details prove to be convincing to investor community, it is highly likely that gold prices may come under increased downside pressure.

First Published: Oct 16 2024 | 9:22 AM IST