Gold (XAU) gained 0.87% on Tuesday as the U.S. dollar started to weaken after the U.S. inflation data demonstrated a slowdown, reinforcing beliefs that the U.S. interest rate might have already peaked.
Possible effects for traders
U.S. inflation indicated that U.S. consumer prices didn’t change in October, and the year-over-year increase in core inflation numbers was the least significant in two years. The U.S. Dollar Index (DXY) and benchmark U.S. 10-year Treasury yields fell towards their two-month low due to lower-than-expected inflation figures. Thus, the opportunity cost of holding gold decreased. Following Tuesday’s data, U.S. interest rate futures indicated a notable shift in market expectations regarding the U.S. interest rate trajectory. The chances of a rate cut by May 2024 jumped from 34% to 65%, according to the CME’s FedWatch tool. Thus, anticipations of decreasing U.S. interest rates increase the gold’s appeal.
XAUUSD continued to rise during the Asian and early European trading sessions. Today, traders should focus on the U.S. Producer Price Index (PPI) report due at 1:30 p.m. UTC. Higher-than-expected PPI figures may bring the XAUUSD price below 1,955. However, the short-term bullish trend in the pair may continue if the figures are lower than expected.
