Gold Price Recovery May Stall Near $1300/Oz On US PPI Data

Gold prices rose as minutes from September’s FOMC meeting revealed many Fed officials remain worried that recently low inflation is not temporary. That seemed to pour a bit of cold water on rate hike speculation, sending the US Dollar and front-end Treasury bond yields lower. Not surprisingly, this proved helpful for non-interest-bearing and anti-fiat assets epitomized by the yellow metal.

September’s US PPI data is next on tap. The headline on-year wholesale inflation rate is expected to rise to 2.6 percent, the highest since February 2012. US economic news-flow has broadly firmed relative to economists’ bets over the past four months, opening the door for an upside surprise. That might cap gold gains for now, although follow-through is likely to wait for the higher-profile CPI report due Friday.

Crude oil prices marked time as a slew of conflicting cues left prices without a clear lead. An EIA report predicted global supply and demand would soften in 2018. A competing analysis from OPEC upgraded demand estimates, citing a strengthening global economy while lowering supply projections for producers outside the cartel. Finally, API said US inventories added 3.1 million barrels last week.

The IEA monthly report split the difference between the OPEC and EIA world-views, projecting that crude prices will be broadly steady next year as demand rises alongside swing supply. Perhaps most ominously, the group said global destocking will halt in 2018, though markets took the remark in stride. Official DOE data on US inventories is up ahead, with forecasts calling for a 2.04 million barrel drop.

GOLD TECHNICAL ANALYSIS – Gold prices are working on a fifth consecutive advance and testing key resistance in the 1295.46-87 area (former double top, 23.6% Fibonacci expansion). A daily close above this barrier exposes the 38.2% level at 1319.05. Trend defining support comes in at 1260.80, the October 6 low.