Gold extended its recovery on Friday, building on the previous day’s rebound from a multi-week low of around $2,600.
By 3:30 pm AEDT (4:30 am GMT), spot gold prices were up by $15.56 or 0.6% to $2,645.5.
Thursday's U.S. macroeconomic data, which revealed the lowest annual rise in the Consumer Price Index (CPI) since February 2021, coupled with a sharp rise in weekly jobless claims, bolstered expectations that the Federal Reserve (Fed) will continue cutting interest rates.
While the markets have largely discounted the prospect of more aggressive monetary easing by the Fed, including an oversized rate cut in November, the September Federal Open Market Committee (FOMC) minutes reaffirmed a cautious outlook.
This has provided some support for the USD, potentially capping further gains for gold. Moreover, there is growing anticipation that China will announce additional fiscal stimulus measures on Saturday to boost its economic growth, a factor that could temper the safe-haven appeal of gold.
As a result, investors are urged to exercise caution, particularly ahead of the release of the U.S. Producer Price Index (PPI), which could influence the USD and gold markets.
Meanwhile, recent data from the U.S. Labor Department revealed that the headline Consumer Price Index increased by 2.4% over the 12 months through September, with core inflation, excluding food and energy, rising by 3.3%.
While the stronger inflation figures initially pushed the USD to a two-month high, the rally was short-lived. In addition, weekly jobless claims rose significantly, with 33,000 more Americans filing for unemployment benefits, reaching a seasonally adjusted 258,000 in the week ending October 5, well above the 230,000 expected.
This indicates potential weakness in the U.S. labour market, reinforcing the likelihood that the Fed will maintain its rate-cutting stance, which is supportive of gold.
However, the yield on the benchmark 10-year U.S. Treasury bond remains above 4%, providing a tailwind for the USD and potentially limiting gold’s upward movement.
