DATA- DEPENDENT GOLD

By Mr. Prithviraj Kothari, MD, RSBL

This week gold continued to hover around the levels of $1176.75 and broadly the key trade range for the yellow metal was $1170- $1175 an ounce.

Gold reached a four-month high of $1,192 on Thursday but was unable to maintain this level, because the US dollar was driven up by higher than expected US inflation figures for September, which in turn put pressure on gold.

Fed has set inflation target for years as it’s a part of the dual-mandate along with full employment. But Inflation has failed to meet the Fed’s target.

Persistently low inflation has led some Fed members to remain dovish on the apt timing for a stabilization of US monetary policy.

At the beginning of the week, Chicago Federal Reserve president Charles Evans said earlier today that he would prefer to wait until 2016 to raise interest rates, citing inflation as a central impediment.

Moreover, Data released on Thursday showed that the US labor market is steadily recovering despite the worrisome September job’s report – weekly unemployment claims came in at 255,000, below the consensus of 269,000.

Apart from this some other important data released through the week were-

• US CPI month-over-month in September met expectations of a 0.2 percent decline

• PPI month-over-month in September dipped 0.5 percent, disappointing market expectations of a 0.2 percent drawdown

• Empire State manufacturing index for October at -11.4 was worse than the expected -7.3

• The Philly Fed manufacturing index at -4.5 missed the -1.8 forecast

• Core retail sales month-over-month in September fell 0.3 percent, below the forecast of -0.1 percent. Retail sales over the same period rose 0.1 percent, just missing the 0.2 percent consensus

•  Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index fell by 0.2% for the month of September, in line with consensus estimates. A month earlier, the reading fell by 0.1% in August. On a year over year basis, the headline reading is identical to its level 12 months ago

• Core PPI month-over-month last month stood at -0.3 percent, another figure to miss estimates, which were a 0.1 percent uptick

Though the Core CPI was moving in a positive direction from its previous levels of August still it remained under the Fed's preferred gauge of under 1.5%.

The set target for long term inflation by the Fed is likely 2% before it raises its benchmark Federal Funds Rate.

Gold prices eased in Asia on Friday on profit taking on recent gains on a soft. Outlook for U.S. interest rates. On Thursday morning, the U.S. Department of There were signals throughout the report of weakness in the energy sector, restraining inflationary pressures overall.

The spot gold price was last at $1,176/1,176.20 per ounce, down $5.90 on Thursday’s close. 

Jobs data has acquired greater significance after the US Federal Reserve made its approach to the normalization of monetary policy entirely data-dependent.

Gold drifted lower still on Friday morning in Europe after dollar continued to pare earlier losses thanks to better-than-expected US jobs data.

As dissent grows in the Federal Reserve over the appropriate measures for 2015, the dollar has deteriorated to the weakest mark since August 25.

Various Fed members are growing more vocal in their view that the US economy is not ready for a federal funds hike – in direct opposition of Chairwoman Janet Yellen.

Yellen, along with vice chair Stanley Fischer, have said recently that a normalization of US monetary is still a viable option for 2015.

However as per market analysts, the FOMC is not seen lifting rates until March at the earliest.

While the market is once again divided into bearish and bullish supporters, the yellow-metal has found support as the market’s pricing of the next US Federal Reserve rate hike is pushed out.

The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.

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