VOT Research Desk

Due to rising predictions that the Fed may soon pivot away from aggressive interest rate hikes, gold prices have had an explosive start to the month.

The widely anticipated U.S. Consumer Price Inflation figure climbed less than anticipated in October, raising predictions that supersize rate hikes are likely now in the rearview mirror.

This was one of the main catalysts driving the spectacular surge higher. The Fed was somewhat relieved by last week’s lower-than-expected Consumer Price Inflation statistics, which might be a sign that October is the beginning of a disinflationary trend that lasts through next year.

The Producer Price Index, a crucial indicator of inflation at the wholesale level, climbed by 8% in October compared to an increase of 8.4% in September, giving gold prices a further lift this week. It was a lot better than expected and the smallest increase since July of last year, though it was still historically high.

This is the second consecutive inflation report this month to indicate a slowdown in the economic crisis-era price increases. Since it measures pipeline prices that eventually find their way into the market, the producer index is typically seen as a good leading predictor for inflation.

PPI measures the prices that producers receive at the wholesale level, whereas CPI shows what consumers pay for goods and services. The Federal Reserve has been aggressively raising interest rates for the majority of this year in an effort to lower inflation.

Following this week’s statistics, traders have begun pricing in a significant probability that the Fed would only raise rates by half a percentage point in December. The central bank has hiked its benchmark borrowing rate six times for a total of 3.75%, including four straight 75-basis point rate hikes.

There are also growing bets that the Federal Reserve will slow down the rate hikes even more, to just a quarter percentage point increase by the first half of 2023.

Federal Reserve Vice Chairman Lael Brainard appeared to share this opinion this week when she said that if the economic data continues to show inflation is on the decline, then the Federal Reserve will slow down the pace of rate hikes.

Oct 25, 2022

VOT Research Desk

The price of gold has recently stabilized at slightly about $1,650. According to Commerzbank analysts, the prospect of rate hikes continues to put downward pressure on the price of gold.

After the predicted 75 bps increase next week, there have been some recent signs that the rate-hike pace may pause.

As a result, gold rose to $1,670. This suggests that gold will have significant upside potential as soon as a stop to the aggressive rate rises is in sight.

However, this has not yet occurred, which is why the majority of price increases were again overturned. Gold continues to have a lack of interest from investors, creating a constant headwind.

In the most recent reporting week, speculative financial speculators dramatically increased their net short positions, indicating that the bulk of them are still betting on a declining gold price.

Investors in ETFs once more liquidated significant positions last week. Only indications that the aggressive rate rises will stop are likely to cause attitude to change in this case as well.

Oct 05, 2022

VOT Research Desk

Gold Futures: The upside may pause.

According to early readings from CME Group, open interest in gold futures markets decreased by just 29 contracts on Tuesday, somewhat offsetting the previous daily rise. Volume in the same line started moving downward again and decreased by around 10.8K contracts.

Gold appears to be limited at $1,735

On Tuesday, gold prices increased for the sixth session in a row and also crossed the crucial $1,700 threshold.

The sharp upswing, however, was accompanied by a decline in open interest, which raises the possibility that the acute comeback may soon slow down. The following obstacle appears at the September high of $1,735 per troy ounce (September 12).

Technical Examination

The gold price is approaching the Fibonacci 38.2% one-day support at $1,717, according to the Technical Confluence Detector, and if it breaks through that level, a new decline into the pivot point one-week R2 at $1,711 would be imminent.

While the convergence of the SMA10 four-hour and pivot point one-day S1 at $1,705 will provide a solid cushion for buyers, the Fibonacci 61.8% one-day at $1,709 is the next stop for selling.

The immediate resistance, on the other hand, is positioned at $1,721, the Fibonacci 23.6% one-day, and if it is broken, the next significant barrier, which is located at $1,726 will be retested. The pivot point one-month R1 and the SMA50 one-day meet at that level.

If the upswing gains momentum, investors will be keeping an eye on the previous day’s high of $1,730. For proponents of gold, the $1,735 high from the previous month will be hard to refuse.

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